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Assume that inflation is growing at a rate of 30%, that the money supply is currently growing at about 30%, and that output is growing
Assume that inflation is growing at a rate of 30%, that the money supply is currently growing at about 30%, and that output is growing at about 2%. Now, assume that the real interest rate is at 2%. What must the central bank do in order to bring inflation back down to "acceptable" levels (say 5%)? Use a graph to illustrate the effects of this drastic monetary policy.
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