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Sacrifice Ratio

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Sacrifice Ratio
The cost to an economy when growth slows or stops in order to combat inflation. The ratio shows the cost for each percentage of decrease in inflation. It is calculated thusly:

Sacrifice ratio = (Dollar cost of lost production) / (Percentage of change to the inflation rate)


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9781412807487 Monetary policy and macroeconomic stabilization; the roles of optimum currency areas, sacrifice ratios, and labor market adjustment.
The model has a long-run sacrifice ratio of about 3.
The converse of Nairu is the sacrifice ratio - the change in employment created by reducing or increasing inflation.
 
 
 
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