The sacrifice ratio is the
A)sum of the inflation and unemployment rates.
B)inflation rate divided by the unemployment rate.
C)number of percentage points annual output falls for each percentage point reduction in inflation.
D)number of percentage points unemployment rises for each percentage point reduction in inflation.

Question

Quizplus · Accepted Answer

The sacrifice ratio refers to the amount of loss in terms of output that a country must endure to reduce inflation by 1%. It is calculated as the number of percentage points of annual GDP that a country must sacrifice to reduce inflation by 1%. Therefore, the correct option is (C) - the number of percentage points annual output falls for each percentage point reduction in inflation.

The Sacrifice Ratio Is the