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Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460

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BuyFindarrow_forward

Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460
Chapter 15, Problem 17E
Textbook Problem
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“If everyone believed that the monetary authority was going to cut the inflation rate from 6 percent to 3 percent, such a reduction in inflation could be achieved without any significant increase in unemployment.”

To determine

To explain:

The given statement is associated with which school of thought "If everyone believed that the monetary authority was going to cut the inflation rate from 6 percent to 3 percent, such a reduction in inflation could be achieved without any significant increase in unemployment."

Explanation of Solution

"If everyone believed that the monetary authority was going to cut the inflation rate from 6 percent to 3 percent, such a reduction in inflation could be achieved without any significant increase in unemployment."

The above statement is associated with new classical theory, as they believe in rational expectation that is when economic agents in the market are aware of the government polic...

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