If the Sacrifice Ratio Is 4,then Reducing the Inflation Rate

question 6

Multiple Choice

If the sacrifice ratio is 4,then reducing the inflation rate from 9 percent to 5 percent would require sacrificing

• A)4 percent of annual output.
• B)8 percent of annual output.
• C)12 percent of annual output.
• D)16 percent of annual output.

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Definitions:

Disposable Income

The disposable income households have for expenditures and savings, post-income taxation.

C + I

A formula component in macroeconomics representing total private consumption (C) plus total private investment (I).

MPS

The marginal propensity to save, which is the fraction of an additional unit of income that is saved rather than spent.

Expected Rate of Profit

The anticipated return on investment, representing the gain or loss compared to the initial investment amount.