As an Economist Working for a U

Multiple Choice

As an economist working for a U.S.government agency you determine that a particular country has a sacrifice ratio of 3.Policy-makers in that country are thinking of lowering the inflation rate from 10% to 4%.Is this sacrifice ratio higher or lower than the typical estimate? From your numbers,what is the amount of output that will be lost for this country to reduce its inflation rate?

A) The sacrifice ratio is higher than the typical estimate.It will cost 30% of annual output to reach the new inflation target.
B) The sacrifice ratio is higher than the typical estimate.It will cost 18% of annual output to reach the new inflation target.
C) The sacrifice ratio is lower than the typical estimate.It will cost 30% of annual output to reach the new inflation target.
D) The sacrifice ratio is lower than the typical estimate.It will cost 18% of annual output to reach the new inflation target.