Suppose that reducing inflation 3 percentage points would cost a country 15 percent of annual output.What is this country's sacrifice ratio?
A) 3
B) 5
C) 8
D) 12

Question

Quizplus · Accepted Answer

The sacrifice ratio is calculated by dividing the percentage loss in output by the percentage reduction in inflation. Here, 15% loss in output divided by 3% reduction in inflation equals a sacrifice ratio of 5.

Suppose That Reducing Inflation 3 Percentage Points Would Cost a Country