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4. Problems and Applications Q6 Suppose the Federal Reserve's policy is to maintain low and stable inflation by keeping unemployment at its natural rate. However,
4. Problems and Applications Q6 Suppose the Federal Reserve's policy is to maintain low and stable inflation by keeping unemployment at its natural rate. However, the Fed believes that the natural rate of unemployment is 4 percent when the actual natural rate is 5 percent. If the Fed bases its policy decisions on its belief, the inflation rate will spiral
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