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Before expectations adjust, a reduction in nominal spending real output. After expectations adjust, real output...

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Before expectations adjust, a reduction in nominal spending real output. After expectations adjust, real output increases; remains permanently elevated reduces; remains permanently depressed increases; returns to where it was prior to the shock reduces; returns to where it was prior to the shock Question 10 1 pts Consider the following statements: 1. An inflation target anchors expectations about the future purchasing power of the dollar better than a price level target. II. Following a negative shock to nominal spending, a central bank committed to achieving its price level target will promote a fast recovery more effectively than a central bank committed to achieving its inflation target. III. A price level target makes up for past mistakes, whereas an inflation target lets bygones-bebygones. Only statement 1 is true Only statement II is true. Statements I and III are true. Statements II and III are true

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