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Problem 1:
(a) Distinguish between political and partisan monetary cycles on inflation and unemployment rates.
(b) In the rule versus discretion literature, explain how dynamic inconsistency might lead to costly outcomes for the economy as a whole.
Problem 2:
(a) To what extent would expansionary monetary policy help to curb an economic crisis? Explain.
(b) Analyse and explain the dilemma of the monetary agent who tries to be conservative in financing fiscal deficits in an attempt to ensure price stability at least in the short run.
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