Suppose an econometrician discovers that during the past decade,lower unemployment rates have always been accompanied by higher inflation rates.When asked how to reduce unemployment,the econometrician recommends the policy of increasing the money supply to trigger more inflation.Explain why this policy may fail to work in a world where people have rational expectations.

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The Answer of Suppose an econometrician discovers that during the past decade,lower unemployment rates have always been accompanied by higher inflation rates.When asked how to reduce unemployment,the econometrician recommends the policy of increasing the money supply to trigger more inflation.Explain why this policy may fail to work in a world where people have rational expectations.

Suppose an Econometrician Discovers That During the Past Decade,lower Unemployment