The increase in unemployment needed to reduce inflation by 1% is called
A) the misery index
B) the sacrifice ratio
C) the multiplier
D) the credibility gap
E) the inflation decelerator

Question

Quizplus · Accepted Answer

The increase in unemployment needed to reduce inflation by 1% is known as the sacrifice ratio. It measures the cost incurred by an economy in terms of lost output and employment when it tries to reduce inflation. A higher sacrifice ratio implies a greater cost to an economy in terms of higher unemployment and lost output to achieve a target reduction in inflation.

The Increase in Unemployment Needed to Reduce Inflation by 1