Suppose that consumer confidence unexpectedly rises six months before the central bank detects the change or its

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Suppose that consumer confidence unexpectedly rises six months before the central bank detects the change or its magnitude. Compared to your answer to Problem 11, what happens to inflation and output in that six-month interval? How does monetary policy return the economy to long-run equilibrium at the initial inflation target?

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Money Banking and Financial Markets

ISBN: 978-0078021749

4th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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