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Question: expectations on inflation in the medium run blanchard macroeconomics...

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Expectations on inflation in the medium run - Blanchard, Macroeconomics, Chapter 9, Problem 5.

d. Compare the inflation and output outcomes in part (b) e. Which scenario, part (b) or part (c), do you think is more f. Suppose in period t4, the central bank decides to raise with that in part (c). realistic? Discuss the real policy rate high enough to return the economy immediately to potential output and to the period t rate of inflation. Explain the difference between central bank policies using the two assumptions about expected infla- tion in part (b) and part (c).

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