a. Central bankers must manage expectations. Suppose that inflation is running at 10% and the central banker
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b. Suppose that the public does believe the central banker. What temptation might the central banker face? (Imagine that it is an election year and the central banker would like to see the current administration reelected.)
c. If the central banker is not believed, what will happen? Use your answer to parts b and c to discuss the importance of independent central banks.
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