The financial times on june 8 2006 reported that the, Microeconomics

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The financial times on june 8 2006 reported that the

Question: The Financial Times on June 8, 2006, reported that "the European Central Bank has lost patience with inflation that has remained persistently higher than its 2 per cent definition of price stability. It is almost certain to raise the cost of borrowing today, perhaps by 0.5 percentage points." Explain why increasing the "cost of borrowing" is an appropriate policy in this case.

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