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Suppose that real GDP has been above potential GDP for some period of time. The government is considering a reduction in spending, and the Federal Reserve is trying to determine what is likely to happen to inflation. Trace out two possible scenarios that could occur as a result of decreased government spending. Be sure to comment on the long-run inflation level in each case.
Time Sampling
A behavioral observation technique that involves observing the presence or absence of behaviors within specific time intervals.
Frequency
The rate at which an event or behavior occurs over a specified period of time.
Anecdotal
Pertaining to a short and interesting story or personal account, often used as informal evidence to support a point.
Duration
The total time period during which an event or condition exists or persists.
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