Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 35 - Part XII - The Short-Run Trade-Off between Inflation and Unemployment - Problems and Applications - Page 791: 5

Answer

Milton would be more in favor of the proposed in monetary policy than James.

Work Step by Step

Milton believed that the expectations of inflation would change quickly in responding to new policies. Since this happens, Milton would want contractionary policies to combat inflation. Should the expectations of inflation change quickly, the costs incurred by reducing inflation (the lost output) would be lower than if it took some time to adjust the expectations of inflation.
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