Using the typical estimate of the sacrifice ratio,how much output would be lost in reducing inflation from 3% to 1%?
A)5%
B)10%
C)15%
D)20%

Question

Quizplus · Accepted Answer

The typical estimate of the sacrifice ratio is about 5%, meaning that for each 1% reduction in inflation, 5% of one year's GDP is lost. Reducing inflation by 2% (from 3% to 1%) would therefore result in a 10% loss of output.

Using the Typical Estimate of the Sacrifice Ratio,how Much Output