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Precondition for future interest rate

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Use the static AD-AS model to describe the circumstances under which the Reserve Bank will be prompted to raise interests as depicted by the following statement: "The nation's labour market is close to the point when workers, are absorbed into a strengthening economy, stoking the wage inflation that is a key precondition for future interest rate hikes". In your answer make sure to also describe the long run implications if the Reserve Bank fails to raise interest rates under such circumstances.

Reference no: EM131704577

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