Essay
Because deflation is so costly,some have argued that setting an inflation target at 2 percent is too low and it should be set higher,to 3 percent,especially in the economic environment of 2007-2010.Consider the impact of such an increase in the inflation target using the AD/AS framework in the short and long run.Begin your analysis in the long-run equilibrium.
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Consider the AD curve: 
if in the short...View Answer
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if in the short...View Answer
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