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From one year to the next, inflation falls from 5 to 4 percent, while unemployment falls from 7 to 6 percent. Which of the following events could be responsible for this change? a. The central bank increases the growth rate of the money supply. b. The government cuts spending and raises taxes to reduce the budget deficit. c. Newly discovered oil reserves cause world oil prices to plummet. d. The appointment of a new Fed chair increases expected inflation.

Chapter 35, Problem 7

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QUESTION:

From one year to the next, inflation falls from 5 to 4 percent, while unemployment falls from 7 to 6 percent. Which of the following events could be responsible for this change?

a. The central bank increases the growth rate of the money supply.

b. The government cuts spending and raises taxes to reduce the budget deficit.

c. Newly discovered oil reserves cause world oil prices to plummet.

d. The appointment of a new Fed chair increases expected inflation

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Questions & Answers

QUESTION:

From one year to the next, inflation falls from 5 to 4 percent, while unemployment falls from 7 to 6 percent. Which of the following events could be responsible for this change?

a. The central bank increases the growth rate of the money supply.

b. The government cuts spending and raises taxes to reduce the budget deficit.

c. Newly discovered oil reserves cause world oil prices to plummet.

d. The appointment of a new Fed chair increases expected inflation

ANSWER:

Step 1 of 2

Given data:

From one year to the next, inflation falls from 5 to 4 percent, while unemployment falls from 7 to 6 percent. Which of the following events could be responsible for this change?

a. The central bank increases the growth rate of the money supply.

b. The government cuts spending and raises taxes to reduce the budget deficit.

c. Newly discovered oil reserves cause world oil prices to plummet.

d. The appointment of a new Fed chair increases expected inflation

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