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With COLAs in Effect,if the Fed Wishes to Avoid a Permanent

Question 23

Multiple Choice

With COLAs in effect,if the Fed wishes to avoid a permanent acceleration of inflation after a permanent adverse supply shock,it


A) must respond with an accommodating monetary policy.
B) must respond with a neutral monetary policy.
C) must respond with an extinguishing monetary policy.
D) can choose from accommodating,neutral,or extinguishing monetary policies.

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