If the sacrifice ratio is 3,reducing the inflation rate from 10 percent to 5 percent would require sacrificing what percent of annual output?
A) 2 percent of annual output
B) 5 percent of annual output
C) 6 percent of annual output
D) 15 percent of annual output

Question

Quizplus · Accepted Answer

The sacrifice ratio is the percentage of annual output lost to reduce inflation by 1 percentage point. With a sacrifice ratio of 3, reducing inflation by 5 percentage points (from 10% to 5%) would require sacrificing 15% of annual output (3 x 5 = 15).

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