Monetary Policy in Mokania Mokania has had inflation of 15% for many years. Mokana establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate. r to Monetary Policy in Moka nia. The Bank of Mokania publicizes its intent to reduce the inflation rate to 5%. If it is successful in doing so but people had expected inflation to fall only to 10 %, then unemployment rises but it would have risen by less if people had expected inflation to be 6%. 9. Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes that it intends to reduce the inflation rate to 5%. If it actually reduces inflation to 3% and people were expecting inflation to fall only to 890, then unemployment rises but it would have risen by less if the Bank of Mokania had reduced inflation to 5% rather than 3%. Refer to Monetary Policy in Mokania. The Bank of Mokania reduced inflation to its announced goal of 5%. However its efforts made the unemployment rate rise by 10 percentage points for a year while output fell by 30 percent for a year. Which of the following is correct?

a. Initially people's inflation expectations had been higher than 5%. The sacrifice ratio was 3. 10.