Defined in monetary theory as the ratio of income losses suffered in a period of disinflation (a considerable decrease in the rate of inflation) to the reduction in the rate of inflation achieved. The ratio indicates the percentage of annual gross domestic product that must be “sacrificed” to reduce inflation by one percent. In this sense, the sacrifice ratio can be seen as a measure of the cost of disinflation. – However, it should be borne in mind that – the sacrifice ratio always refers only to the period of decline in inflation, rather than to the overall increase in inflation, – the income losses are calculated only in nominal terms (in money terms), without taking into account the purchasing power of income, and – the complex redistribution effects (effects on the redistribution of incomes) of inflation are completely disregarded. In this respect, the sacrifice ratio figure very easily leads to misunderstandings.
Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/