Question

If RBI wants to reduce the inflation rate from 6% to 4%, it often has to slow down the economy, leading to a temporary drop in production. In this context, what does Sacrifice Ratio measure?

A The percentage increase in employment to reduce inflation by one percentage point.
B The percentage of one year’s Real GDP that must be given up to reduce inflation by one percentage point.
C The amount of foreign exchange reserves lost when the currency devalues due to inflation
D The ratio of people who lose their jobs compared to those who get a salary hike to match the inflation rate of the economy
E The percentage increase in the price of gold when inflation rises, leading to decline in investment in the economy
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