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Imagine a central bank that wants the inflation rate to be 2%. In this country real GDP growth was ...

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Imagine a central bank that wants the inflation rate to be 2%. In this country real GDP growth was ...

Imagine a central bank that wants the inflation rate to be 2%. In this country real GDP growth was 4%, but then suddenly slowed to 2%. If the central bank continued to grow the money supply at the rate consistent with 2% inflation and 4% real GDP growth, what will happen?

▸ Inflation will undershoot by 2%.

▸ Inflation will stay at 2%.

▸ Inflation will overshoot by 3%.

▸ Inflation will overshoot by 2%.

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

Read 34 times

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Thanks

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