Consider an economy that is in the process of a disinflation. If the sacrifice ratio is 3, then
A) it costs 3 percent of GDP to reduce inflation by one percentage point.
B) unemployment increases by 3 percent during the period of disinflation
C) the cumulative loss of output in the economy will reach a total of 3 percent.
D) unemployment increases by 3 percent for every one percent reduction in inflation.
E) the costs of disinflation are 3 times the benefits of disinflation.
Correct Answer:
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