According to the Lucas critique, traditional economic analysis has neglected the impact of prior experience onIncorrect Answerexpectations and thus on economic outcomes. For instance, suppose the Fed announces a new target rate of inflation that is below the current rate. If epectations are rational , the sacrifice ratio the number of percentage points ofncorrect Answer GDP that must be foregone to reduce inflation by 1 percent-will be large, as it can take time for the inflation expectations of workers negotiating contracts and firms setting prices to catch up with the announced policy target. If, however, exectations are adaptive-with firms and individuals basing decisions on all publicly availablencorrect Answerinformation-the sacrifice ratio can be small or even zero, since inflation expectations will immediately switch to the announced policy target. The Lucas critique entails that economists evaluating alternative-policies should consider how policy affects expectations and thus behavior.