If a Central Bank Is to Successfully End a Sustained

question 34

Multiple Choice

If a central bank is to successfully end a sustained inflation,it is essential that it

• A)avoid any loss in national income.
• B)do so using a "cold-turkey" approach.
• C)change people's expectations of future inflation.
• D)maintain the sacrifice ratio at a constant level.
• E)avoid any increase in unemployment.

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Definitions:

LIBOR

The London Interbank Offered Rate, a benchmark interest rate at which major global banks lend to one another, often used as a reference rate in financial markets.

SONIA

Sterling Overnight Index Average, an interest rate benchmark that reflects the average of the interest rates that banks in London pay to borrow sterling overnight from other financial institutions.

Tokyo Interbank Rate

The interest rate at which banks lend to each other in the Tokyo money market, similar to LIBOR in London.

Euribor

The interest rate at which banks lend to each other in euros within the Euro interbank market.