The typical sacrifice ration is considered to be 5% points of GDP lost for every 1% decline in inflation. Also , Okun's laws says that 1% point of unemployment translates into 2% point of GDP .Under the typical sacrifice ratio a reduction in inflation of 6% points would entail a 30% decline in GDP and a 15% increase in the unemployment rate . However, the recent crisis has forced the government to increase inflation by 3% in order to lower unemployment by 2%, then one could calculate the actual sacrifice ration in this case to be. a) a loss of 5% of GDP b) a gain of 4% of GDP c) a loss of 3.17% of GDP d) a gain of 1.33% of GDP
The typical sacrifice ration is considered to be 5% points of GDP lost for every 1% decline in inflation. Also , Okun's laws says that 1% point of unemployment translates into 2% point of GDP .Under the typical sacrifice ratio a reduction in inflation of 6% points would entail a 30% decline in GDP and a 15% increase in the unemployment rate . However, the recent crisis has forced the government to increase inflation by 3% in order to lower unemployment by 2%, then one could calculate the actual sacrifice ration in this case to be. a) a loss of 5% of GDP b) a gain of 4% of GDP c) a loss of 3.17% of GDP d) a gain of 1.33% of GDP
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The typical sacrifice ration is considered to be 5% points of GDP lost for every 1% decline in inflation. Also , Okun's laws says that 1% point of
a) a loss of 5% of GDP
b) a gain of 4% of GDP
c) a loss of 3.17% of GDP
d) a gain of 1.33% of GDP
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