EBK THE ECONOMICS OF MONEY, BANKING AND
EBK THE ECONOMICS OF MONEY, BANKING AND
4th Edition
ISBN: 8220100668203
Author: Mishkin
Publisher: PEARSON
Question
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Chapter 24, Problem 5Q
To determine

To Explain:

The reason why divine coincidence simplifies the task of policymakers.

Concept introduction:

Divine Coincidence:  Olivier Blanchard and Jordi Galí in 2005 defined the concept of divine coincidence. It means that there is no trade-off between the stabilization of inflation and the stabilization of the output gap for central banks. It signifies the absence of real imperfections like real wage rigidities. It implies that output gap can be brought to zero by controlling inflation, and there is no need to have separate targets for both.

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