Imagine an economy in which all wages are set in three-year contracts. In this world, the central
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Imagine an economy in which all wages are set in three-year contracts. In this world, the central bank announces a disinflationary change in monetary policy to begin immediately. Everyone in the economy believes the central bank’s announcement. Would this disinflation be costless? Why or why not? What might the central bank do to reduce the cost of disinflation?
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In an economy where all wages are set in threeyear contracts a disinflationary change in monetary policy announced by the central bank may not be costless Disinflation refers to a deliberate reduction ...View the full answer
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