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5. Problems and Applications Q5 The inflation rate is 12 percent, and the central bank is...

5. Problems and Applications Q5

The inflation rate is 12 percent, and the central bank is considering slowing the rate of money growth to reduce inflation to 8 percent. Economist Carlos believes that expectations of inflation change quickly in response to new policies, whereas economist Felix believes that expectations are very sluggish.

True or False: Economist Felix is more likely to favor using contractionary policy to reduce inflation than economist Carlos.

True

False

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