If the sacrifice ratio is 3,then reducing the inflation rate from 5 percent to 3 percent would require sacrificing
A)2 percent of annual output.
B)6 percent of annual output.
C)8 percent of annual output.
D)11 percent of annual output.

Question

Quizplus · Accepted Answer

The sacrifice ratio indicates the percentage of annual output lost to reduce inflation by 1%. To reduce inflation by 2% (from 5% to 3%), 2 * 3% = 6% of annual output must be sacrificed.

If the Sacrifice Ratio Is 3,then Reducing the Inflation Rate