Use the aggregate demand-aggregate supply framework to show how a boom in equity prices might affect inflation

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Use the aggregate demand-aggregate supply framework to show how a boom in equity prices might affect inflation and output in the short run. Describe the long-run impact on inflation and output:
(a) If the central bank implicitly allows its inflation target to rise;
(b) If it retains its original 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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