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If there is a threat of inflation

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Reference no: EM132312310

If there is a threat of inflation, but an election is coming up soon, time inconsistency is likely to tempt policymakers to do which of the following?

  • Put off needed but painful actions to slow the economy until after the election
  • Cut interest rates because that is an easy way to slow inflation in the short run?
  • Quickly balance the government budget to cut unemployment
  • Raise taxes and cut spending immediately to show they are tough guys

Reference no: EM132312310

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