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An Estimate of the Short-Run Phillips Curve for a Hypothetical

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An estimate of the short-run Phillips curve for a hypothetical economy is u = 12 - 1.5ð, where u is the unemployment rate and ð is the inflation rate.
a. If the natural rate of unemployment is 8 percent, what is the expected inflation rate that is consistent with this short-run Phillips curve?
b. Suppose the government passes legislation that decreases the natural rate of unemployment by two percentage points. What is the new long-term inflation rate?


Definitions:

Operant Conditioning

A developmental approach where the strength of a certain behavior is shaped through the application of incentives or penalties.

Species Evolve

The process by which biological species undergo change over time through variations in genetics, behavior, or physical characteristics, leading to the development of new species or adaptation within a species.

Sensitive Period

A specific time frame in development when the organism is particularly responsive to certain environmental stimuli or experiences.

Species

A group of living organisms consisting of similar individuals capable of exchanging genes or interbreeding to produce fertile offspring.

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