If a Central Bank Reduces Inflation 2 Percentage Points and This

question 65

Multiple Choice

If a central bank reduces inflation 2 percentage points and this makes output fall 3 percentage points and unemployment rise 5 percentage points for one year,the sacrifice ratio is

• A)5/2.
• B)3/2.
• C)2/3.
• D)2/5.

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Definitions:

Marginal Cost

The cost increase associated with the production of an extra unit of a product or service.

Competitive Firms

Businesses that operate in a market environment where they vie with others to offer goods or services, focusing on price, quality, and innovation.

Monopolists

Individuals or entities that hold a monopoly, controlling the entire supply of a good or service in a particular market, eliminating competition.

Long Run

A period in which all factors of production and costs are variable, allowing firms to adjust to market conditions.