If the Sacrifice Ratio Is 6 Per Cent, Then Reducing

question 49

Multiple Choice

If the sacrifice ratio is 6 per cent, then reducing the inflation rate from 10 per cent to 4 per cent would require sacrificing _____ per cent of annual output.

• A)6
• B)36
• C)13
• D)40

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Definitions:

Yearly Payment

An amount of money that is paid once every year, often related to loans, leases, or other financial agreements.

Interest Rate

The amount charged by lenders to borrowers for the use of assets, expressed as a percentage of the principal.

Coupon Bond

A bond that entitles the holder to receive periodic interest payments (coupons) and the principal back at maturity.

Effective Yield

Effective yield is the total yield on an investment, taking into account the effects of compounding interest or reinvestment over a given period.