Suppose that reducing inflation 3 percentage points would cost a country 4 percent of annual output.This country's sacrifice ratio is

Question

Quizplus · Accepted Answer

The sacrifice ratio is the percentage of a country's annual output that must be foregone in order to reduce inflation by one percentage point. In this case, reducing inflation by 3 percentage points would cost the country 4% of annual output. 
Therefore, the sacrifice ratio is 4/3 (since 4% of output is the sacrifice required to reduce inflation by 3 percentage points).

Suppose That Reducing Inflation 3 Percentage Points Would Cost a Country