Principles of Economics- Mankiw (5th) 774

Principles of - 800 PA R T T H I R T E E N FINAL THOUGHTS the Federal Reserve argued forcefully in his book Hard Heads Soft Hearts that

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800 PART THIRTEEN FINAL THOUGHTS the Federal Reserve, argued forcefully in his book Hard Heads, Soft Hearts that policymakers should not make this choice: The costs that attend the low and moderate inflation rates experienced in the United States and in other industrial countries appear to be quite modest—more like a bad cold than a cancer on society. . . . As rational individuals, we do not volunteer for a lobotomy to cure a head cold. Yet, as a collectivity, we routinely prescribe the economic equivalent of lobotomy (high unemployment) as a cure for the inflationary cold. Blinder concludes that it is better to learn to live with moderate inflation. QUICK QUIZ: Explain the costs and benefits of reducing inflation to zero. Which are temporary and which are permanent? SHOULD FISCAL POLICYMAKERS REDUCE THE GOVERNMENT DEBT? Perhaps the most persistent macroeconomic debate in recent years has been over the finances of the federal government. Throughout most of the 1980s and 1990s, the U.S. federal government spent more than it collected in tax revenue and fi-
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This note was uploaded on 08/01/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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