A country is likely to have a lower sacrifice ratio if

Question

Quizplus · Accepted Answer

A lower sacrifice ratio refers to the ability to reduce inflation with a smaller drop in output. Shorter contracts mean that wages and prices can adjust more quickly to the new inflation target set by the Central Bank, leading to a smaller output gap. Additionally, if the Central Bank is credible, then the public will trust that it will maintain low and stable inflation, reducing the need for high output costs to achieve the target.

A Country Is Likely to Have a Lower Sacrifice Ratio