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inflation and interest rates L10 M2 economics

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Pregunta:

Reasons higher interest will cut inflation:

Autor: Dakota howells



Respuesta:

1. Appreciation of the exchange rate – via inflow of hot money makes imports cheaper 2. Slower growth of ad – helps eliminate a positive output gap – less demand pull inflation 3. Wage inflation – reduced customer borrowing and spending may cause the labour market to soften – fall in job vacancies / perhaps leading t weaker wage growth.


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