If the Fed Reduces Inflation 1 Percentage Point and This

question 169

Multiple Choice

If the Fed reduces inflation 1 percentage point and this makes output fall 5 percentage points and unemployment rises 2 percentage points for one year, the sacrifice ratio is

• A)1/5.
• B)2.
• C)5/2.
• D)5.

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Definitions:

Money Supply

The complete sum of economic assets at a specific time within an economy, encompassing cash, coins, and the funds held in checking and savings accounts.

Lower Unemployment

A condition characterized by a reduction in the number of people who are actively seeking work but unable to find employment.

Higher Inflation

An economic condition characterized by a significant increase in prices and a decrease in the purchasing value of money.

Annual Output

The aggregate sum of products and services generated by an economy or company within a single year.