If the sacrifice ratio is 3, reducing the inflation rate from 10 percent to 6 percent would require sacrificing what percent of annual output?
A)2 percent of annual output
B)5 percent of annual output
C)6 percent of annual output
D)12 percent of annual output

Question

Quizplus · Accepted Answer

The sacrifice ratio is the percentage of annual output lost to reduce inflation by 1 percentage point. With a sacrifice ratio of 3, reducing inflation by 4 percentage points (from 10% to 6%) would require sacrificing 12% of annual output (3 x 4 = 12).

If the Sacrifice Ratio Is 3, Reducing the Inflation Rate