The sacrifice ratio is defined as
A)the percentage of output lost for every 1 percent increase in the unemployment rate
B)the percentage increase in the unemployment rate for every 1 percent reduction in GDP
C)the percentage of output lost for each 1 percent reduction in the rate of inflation
D)the inflation rate plus the unemployment rate
E)the inflation rate divided by the unemployment rate

Question

Quizplus · Accepted Answer

The sacrifice ratio is the percentage of output lost for each 1 percent reduction in the rate of inflation. This means that if a government or central bank wants to reduce inflation by 1%, it may need to sacrifice a certain amount of output, as represented by the sacrifice ratio. Choices A and B are incorrect because they refer to the impact of unemployment or GDP on output, rather than the impact of inflation. Choices D and E are also incorrect because they are not related to the sacrifice ratio.

The Sacrifice Ratio Is Defined as