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11) Suppose the economy is operating at the natural rate of unemployment with a high rate of
inflation (point A in Exhibit 1). Suppose the central bank announces a sudden monetary
contraction to reduce inflation. Shown below are two possible paths the economy might take to
adjust to the new lower rate of money growth. Choose the path that best depicts what might
happen in each of the following cases and explain your reasoning,
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11) Suppose the economy is operating at the natural rate of unemployment with a high rate of
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