Consider an Economy That Is in the Process of a Disinflation.Suppose

question 62

Multiple Choice

Consider an economy that is in the process of a disinflation.Suppose that over a 2-year period,the rate of inflation is reduced from 6% to 1%.Over this same time,the cumulative loss in real GDP is $30 billion.Potential GDP is $600 billion.What is the sacrifice ratio?

• A)1
• B)2
• C)3
• D)4
• E)5

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Definitions:

Quality Of Income Ratio

A metric assessing the proportion of income that has been realized or converted into cash, providing insight into the company's cash flow quality.

Receivables

Amounts due to a company for goods or services that have been provided but not yet paid for by the customers.

Accrue Expenses

The recording of expenses that have been incurred but not yet paid, reflecting obligations on the balance sheet.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for non-cash transactions, deferred taxes, and changes in working capital to calculate cash flow from operating activities.