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Question: During 2002, the Federal funds rate remained more than 1% below the rate of inflation. When that happened in 1972 and 1975, the next two business cycle peaks ended in double-digit inflation, although admittedly higher oil prices were also responsible. Do you think that the Fed decision to hold the funds rate below equilibrium will cause higher inflation at the peak of the next business cycle? What factors would influence your answer?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M93115137

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