An Economy Has a Current Inflation Rate of 7

question 8

Multiple Choice

An economy has a current inflation rate of 7%.If the central bank wants to reduce inflation to 4% and the sacrifice ratio is 2,then how much annual output must be sacrificed in the transition?

• A)10%
• B)8%
• C)6%
• D)None of the above is correct.

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Definitions:

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

Import

The purchase of goods or services from foreign producers, bringing them into one's home country.

Export

The sale of goods or services produced in one country to another country, contributing to a nation's gross domestic product.

Trucks

Heavy vehicles designed for transporting goods, often playing a critical role in logistics and supply chains.