Which of the following best defines the sacrifice ratio?
A)the sum of the inflation and unemployment rates
B)the inflation rate divided by the unemployment rate
C)the number of percentage points annual output falls for each percentage point reduction in inflation
D)the number of percentage points unemployment rises for each percentage point reduction in inflation

Question

Quizplus · Accepted Answer

The sacrifice ratio is defined as the number of percentage points of annual output that a country must sacrifice (i.e. forego) for each percentage point reduction in inflation. It provides an estimate of the cost of reducing inflation to policymakers.

Which of the Following Best Defines the Sacrifice Ratio