Abstract
An increase in money supply lowers unemployment. On the other hand, it raises inflation. However, it has no effect on the structural deficit. Correspondingly, an increase in government purchases lowers unemployment. On the other hand, it raises inflation. And what is more, it raises the structural deficit. The target of the central bank is zero inflation. By contrast, the targets of the government are zero unemployment and a zero structural deficit.
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© 2010 Springer-Verlag Berlin Heidelberg
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Carlberg, M. (2010). Monetary and Fiscal Interaction. In: Monetary and Fiscal Strategies in the World Economy. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-10476-3_7
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DOI: https://doi.org/10.1007/978-3-642-10476-3_7
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Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-10475-6
Online ISBN: 978-3-642-10476-3
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