If People in Countries That Have Had Persistently High Inflation

question 44

Multiple Choice

If people in countries that have had persistently high inflation are skeptical about efforts to reduce inflation, the short-run Phillips curve will remain far to the

• A)left, and the sacrifice ratio will be low.
• B)left, and the sacrifice ratio will be high.
• C)right, and the sacrifice ratio will be low.
• D)right, and the sacrifice ratio will be high.

---

Definitions:

Risk Aversion

The tendency of investors to prefer lower risk or safer investments to avoid potential losses.

Portfolio Beta

A measure of a portfolio's volatility in relation to the market as a whole; it indicates the sensitivity of the portfolio's returns to market movements.

SML Shifts

Changes in the Security Market Line, a graphical representation of the Capital Asset Pricing Model (CAPM) that shows different levels of systematic, or market, risk versus return for the whole market.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically associated with government bonds.