16. The chapters discussion of Inflation Bias and Other Problems of Policy Formulation suggests (p. 481, paragraph

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16. The chapter’s discussion of “Inflation Bias and Other Problems of Policy Formulation”

suggests (p. 481, paragraph 4) that there may not really be any such thing as a permanent fiscal expansion. What do you think? How would these considerations affect the exchange rate and output effects of fiscal policy? Do you see any parallels with this chapter’s discussion of the longer-run impact of current account imbalances?

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