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Business LibreTexts

25: Inflation and Money

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    chapter objectives 

    By the end of this chapter, students should be able to:

    1. Describe the strongest evidence for the reduced-form model that links money supply growth to inflation.
    2. Explain what the aggregate supply-aggregate demand (AS-AD) model, a structural model, says about money supply growth and the price level.
    3. Explain why central bankers allow inflation to occur year after year.
    4. Define lags and explain their importance.