If the sacrifice ratio is 6 per cent, then reducing the inflation rate from 10 per cent to 4 per cent would require sacrificing _____ per cent of annual output.

Question

Quizplus · Accepted Answer

The sacrifice ratio is the percentage of annual output that must be foregone in order to reduce inflation by 1 percentage point.

Therefore, to reduce inflation by 6 percentage points (from 10% to 4%), we need to multiply the sacrifice ratio by 6.

6 percent x 6 = 36 percent.

This means 36% of annual output would need to be sacrificed to achieve the desired reduction in inflation.

Therefore, the correct answer is B) 36.

If the Sacrifice Ratio Is 6 Per Cent, Then Reducing