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Assume that in Economyland, people make forecasts based on adaptive expectations. The central bank announces that it will fight a minor recession by increasing the money supply. What would be the effect of the announcement on inflation in the short run? The long run? How would your answers differ if people used rational expectations? Which situation do you think is more realistic, and why?
Nauseated
A feeling of sickness with an inclination to vomit.
Brain's Reinforcement Center
Brain regions involved in the dopamine-based reward system, critical for learning, motivation, and pleasure.
Medial Forebrain Bundle
The area of the limbic system that is part of the brain’s reinforcement center.
Caudate Nucleus
A nucleus within the brain's basal ganglia involved in various functions including motor processing, learning, and memory.
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