Suppose the Sacrifice Ratio is 3. How much annual output would be sacrificed by reducing the inflation rate from 10 percent to 7 percent? 7 percent of annual output 9 percent of annual output 10 percent of annual output 2 percent of annual output Question 38 (1.25 points) Rational Expectations Theory argues that the Sacrifice Ratio could be as low as which of the following? O O O Question 39 (1.25 points) The Theme Inconsistency of government policy implies which of the following? O When people expect that inflation will be low, it is harder for the Bank of Canada to increase output by increasing the money supply- What policymakers say they will do is generally what they will do. but people don't believe them because of current policy The Bank of Canada coordinates its actions with elected officials. People always expect more inflation than policymakers claim they are trying to achieve. Question 40 (1.25 points) Consider a scenario in which the central bank is required to follow a monetary policy rule to stabilize prices. If the economy starts at long-run equilibrium and then aggregate supply shifts right, what should the central bank do, and what will happen to output? O The central bank should increase the money supply, which causes output to move farther from its long-run equilibrium The central bank should decrease the money supply. which causes output to move closer to it: long-run equilibrium The central bank should increase the money supply, which causes output to move closer to its long-run equilibrium The central bank should decrease the money supply, which causes output to move farther from its long-run equilibrium