Countries in which the government heavily regulates the labour market are likely to have ________ sacrifice ratio.
A)an infinite
B)a high
C)a low
D)a negative

Question

Quizplus · Accepted Answer

The sacrifice ratio is the cost in terms of lost GDP that a country must bear to permanently reduce inflation by 1%. When the government heavily regulates the labour market, it becomes difficult for workers to adapt to new economic realities such as technological advancements, changes in consumer preferences, and international competition. As a result, attempts to reduce inflation through monetary policy (e.g. raising interest rates) are likely to have a high sacrifice ratio because they will lead to widespread unemployment and social unrest.

Countries in Which the Government Heavily Regulates the Labour Market