Because Deflation Is So Costly,some Have Argued That Setting an Inflation

question 31

Essay

Because deflation is so costly,some have argued that setting an inflation target at 2 percent is too low and it should be set higher,to 3 percent,especially in the economic environment of 2007-2010.Consider the impact of such an increase in the inflation target using the AD/AS framework in the short and long run.Begin your analysis in the long-run equilibrium.

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Definitions:

Dwarf Planet

A celestial body that orbits the sun and has enough mass to assume a nearly round shape but has not cleared its orbital path of other debris.

Volcanically Inactive

Referring to a volcano that is not currently erupting and shows no signs of impending activity in the near future.

Tectonically Inactive

Refers to regions of the Earth's crust that are not currently experiencing significant tectonic movements, earthquakes, or volcanic activity.

Billion Years

A time scale used to describe events or processes that occur over extremely long periods, typically in the context of the age of the Earth or the universe, equivalent to 10^9 years.