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A central bank announces a new policy that leads both workers and firms to expect a higher rate of inflation in the coming year. Arrange the following events to illustrate the mechanism through which this change in expectations leads to a higher actual rate of inflation, assuming the unemployment rate does not change.
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Introduction to Macroeconomics Course
Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
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A central bank announces a new policy that leads both workers and firms to expect a higher rate of inflation in the coming year. Arrange the following events to illustrate the mechanism through which this change in expectations leads to a higher actual rate of inflation, assuming the unemployment rate does not change.