7. the costs of disinflation the following graph plots the short-run and long-run phillips curves (srpc and lrpc, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point a, where the natural unemployment rate is 6% and the inflation rate is 8% per year. 0 1 2 3 4 5 6 7 8 9 10 20 18 16 14 12 10 8 6 4 2 0 inflation rate (percent) unemployment rate (percent) lrpc a srpc 6, 8 suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. a reduction in the rate of inflation is known asdeflation . to reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of 9% . true or false: if people have rational expectations, the sacrifice ratio could be much smaller than suggested by the short-run phillips curve. true false
