If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 7 percent would require sacrificing how much annual output?
A) 2 percent of annual output
B) 7 percent of annual output
C) 9 percent of annual output
D) 10 percent of annual output

Question

Quizplus · Accepted Answer

The sacrifice ratio of 3 means that for every percentage point reduction in inflation, 3% of annual output must be sacrificed. In this case, reducing inflation from 10% to 7% requires a 3 percentage point reduction, which means sacrificing 3 x 3% = 9% of annual output. Therefore, the answer is C, sacrificing 9% of annual output.

If the Sacrifice Ratio Is 3,reducing the Inflation Rate from 10