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Suppose that inflation is currently 7% and inflationary expectations are also 7%. Assume that intermediate goods prices are not contributing to increased costs. If the Fed wishes to reduce inflation, it must set interest rates to raise consumption raise investment make actual output equal to potential output create an expansionary output gap create a recessionary output gap
SESS9HThe Asker · Economics
Transcribed Image Text: Suppose that inflation is currently 7% and inflationary expectations are also 7%. Assume that intermediate goods prices are not contributing to increased costs. If the Fed wishes to reduce inflation, it must set interest rates to raise consumption raise investment make actual output equal to potential output create an expansionary output gap create a recessionary output gap
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Transcribed Image Text: Suppose that inflation is currently 7% and inflationary expectations are also 7%. Assume that intermediate goods prices are not contributing to increased costs. If the Fed wishes to reduce inflation, it must set interest rates to raise consumption raise investment make actual output equal to potential output create an expansionary output gap create a recessionary output gap
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TF07HW
false
C)- make actual output equal to potential output. Actual inflation = Expected inflation + Demand pull inflation + Cost (Supply) pull inflation In this --Actual ... See the full answer