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Explain the effects of the current and persistent high inflation (CPI, PCE) on firms and households in the input and output markets in the long
Explain the effects of the current and persistent high inflation (CPI, PCE) on firms and households in the input and output markets in the long run. Start with the short-run effects and consider sticky prices, which include wages. Address the impact on Net Domestic Investments and the Labor market (unemployment), including the Labor Force Participation Rate assuming the income effect dominates the substitution effect as real wages fall. Where does this leave Households on a real basis? Connect to economic growth.
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