The Relationship Between Inflation and Unemployment Is Given by
π $\bar u$

question 50

Essay

The relationship between inflation and unemployment is given by
π = π^e - 2(u - $\bar u$ ).
(a)Draw a diagram showing a long-run Phillips curve and two short-run Phillips curves that contain the following points:
A: π = .03,π^e = .03
B: π = .06,π^e = .06
C: π = .03,π^e = .06
D: π = .06,π^e = .03
Label points A,B,C,and D in your diagram.
The unemployment rate at point A equals .05.
(b)What are the values of the natural rate of unemployment and the unemployment rates at points B,C,and D?

---

Definitions:

Good

An item, material, or product that satisfies a want or need; can be tangible (physical) or intangible (like a service).

Perceived Fairness

The subjective judgment by individuals about the fairness or equity of something, often in economic transactions or distributive justice.

Snow Storm

A severe weather condition characterized by heavy snowfall and strong winds, significantly impacting travel and infrastructure.

Demand Curve

A visual depiction that illustrates the link between a product's price and the amount of the product customers are prepared to buy.