You only get the choice for pixels/inch (resolution) when converting from grayscale to bitmap.
When you convert from bitmap to grayscale the size ratio of 1 keeps the image the same size as it was prior in the bitmap mode or the resolution you chose when converting grayscale to bitmap.
Larger number ratios in the bitmap to grayscale dialog reduce the size of the image by the ratio choosen.
2 reduces to 50%
3 reduces to 33%
4 reduces to 25% and so forth
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