If the Fed reduces inflation 1 percentage point and this makes output fall 2 percentage points and unemployment rise 3 percentage points for six months,the sacrifice ratio is
A)1.
B)2.
C)3.
D)4.

Question

Quizplus · Accepted Answer

The sacrifice ratio is the ratio of the change in output to the change in inflation. In this case, the change in output is -2 percentage points and the change in inflation is -1 percentage point, so the sacrifice ratio is -2/-1 = 2.

If the Fed Reduces Inflation 1 Percentage Point and This