* Suppose the fraction of consumption expenditure on imports were to rise from the current 8 percent...

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* Suppose the fraction of consumption expenditure on imports were to rise from the current 8 percent to 24 percent. That is, assume that all nonfood goods purchased by U.S. households are produced outside of the country. Assuming that the average domestic content of imported goods is around one-third, compute how much the rate of infl ation would be reduced if import prices fell by 5 percent?

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Money Banking And Financial Markets

ISBN: 9780073375908

3rd Edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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