Suppose that reducing inflation 3 percentage points would cost a country 12 percent of annual output. What is this country's sacrifice ratio?
A)3
B)3.5
C)4
D)12

Question

Quizplus · Accepted Answer

Sacrifice ratio is calculated by dividing the percentage points of output sacrificed by the percentage point reduction in inflation. 
Sacrifice ratio = (Output sacrificed / % Reduction in inflation)
Here, reduction in inflation is 3 percentage points and output sacrificed is 12 percent. 
Sacrifice ratio = (12 / 3) = 4. Therefore, the sacrifice ratio of the country is 4. 
Hence, the answer is C.

Suppose That Reducing Inflation 3 Percentage Points Would Cost a Country