1. Assuming the typical sacrifice ratio given in lecture,consider an economy where inflation is 8 percent and the governmentwants it to be 5% instead. This economy must sacrifice _____percent of one year’s GDP to do so.
(Carefully follow all numeric directions. Enter youranswer \"as a percent, but without the percentage sign.\" In otherwords, if the economy must sacrifice 99 percent of one year's GDP,enter only 99 in the blank.)
2. Use the information from the last question. Let’s sayresidents of the economy can endure only a loss of 3% real GDP peryear. How many years must this sacrifice happen?
3. Use the information from the above one last time – the aboveyearly sacrifice in GDP means an increase in unemployment of_______ percent each year.
