Solved: Why is disinflation so costly for an economy Are there ways to reduce these

Chapter 0, Problem 3

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QUESTION:

Why is disinflation so costly for an economy? Are there ways to reduce these costs?

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QUESTION:

Why is disinflation so costly for an economy? Are there ways to reduce these costs?

ANSWER:

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Disinflation is a situation in the economy where the price level is falling where the output level falls below the potential level. Thus, the unemployment rate increases as disinflation takes place.

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