b. Why can the sacrifice ratio be expected to be smaller when expectations are more forward-looking? When expectations are more forward-looking, they adjust more quickly during the process of disinflation, perhaps in response to an announcement by the central bank that it wants to reduce the rate of inflation. Thus, the AS slows its upward shifting more quickly, and the result is that output falls by less than otherwise would be the case. This reduction in output contributes to a smaller sacrifice ratio. Part 3 c. Why can the sacrifice ratio be expected to be smaller when central-bank announcements are more credible? When a central-bank announcement of disinflation is more credible, expectations will be less more guided by past inflation and more less influenced by the announced inflation target. This makes expectations more forward-looking backward-looking , which is the same opposite argument as in part (b)