1. Explain why lags make it possible that policy actions intended to stabilize the economy will actually destabilize it.
2. Many observers think that the Federal Reserve succeeded in using deft applications of monetary policy to “fine-tune” the U.S. economy into the full-employment zone in the 1990s without worsening inflation. Use the data on money supply, interest rates, real GDP, unemployment, and the price level given on the inside back cover of this book to evaluate this claim.
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