00:01
For problem two, we are told if autonomous spending falls, the central bank should lower its inflation target in order to stabilize inflation.
00:14
Is this statement true, false or uncertain? explain your answer.
00:20
Well, the statement is uncertain because we are not told about the current states of the economy, whether the economy is operating below potential gdp, above potential gdp, or above potential gdp, or, or at potential gdp.
00:36
We are also not told what is causing a decrease in autonomous spending and why is there a high inflation rate.
00:47
We are not told whether the inflation is high or whether it's low as it needs to be stabilised.
00:54
Because when autonomous spending falls and when the inflation rates are high, this could indicate that there is a decrease in supply.
01:04
So there would be a decrease.
01:07
So gdp would be low and prices would be high...