What evidence does the Volcker disinflation provide concerning the importance of inflation expectations to the costs of disinflation?
Unemployment did rise. However, the sacrifice ratio was lower than many had expected, possibly because Volcker's tough stand on inflation reduced inflation expectations.
Although inflation expectations fell, they did not fall as fast as actual inflation. If they had, unemployment would have risen by less and the cost of the disinflation would have been lower.
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Combining the home money market and the uncovered interest parity relationship, we can see how changes in variables determine:
a. real GDP. b. the exchange rate. c. the price level. d. the quantity of money.
The supply of loanable funds is equal to the supply of saving in the economy. The three sources of saving in an economy include all of the following except
A) households. B) businesses. C) the government. D) the foreign sector.