In the traditional model,the cost of lost output for each one percentage point reduction in the inflation rate is
A)4 percent of a year's real GDP.
B)0.25 percent of a year's real GDP.
C)0.04 percent of a year's real GDP.
D)25 percent of a year's real GDP.

Question

Quizplus · Accepted Answer

The traditional model, often referring to the Phillips Curve, suggests that reducing inflation by 1% typically results in a 4% loss in real GDP, known as the sacrifice ratio.

In the Traditional Model,the Cost of Lost Output for Each