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What Will Actual Unemployment Be (In Relation to the Natural

question 131

Essay

What will actual unemployment be (in relation to the natural rate) in each of the following cases? Use a graph of the modern Phillips curve in your answer.
a.Decision makers underestimate inflation.
b.Decision makers overestimate inflation.
c.Decision makers correctly forecast inflation.


Definitions:

Null Hypothesis

The default position that there is no difference or effect and that any observed differences are due to chance.

Probability

The quantification of an event's chances of occurring, given as a number from 0 to 1.

Region of Rejection

The part of the sample space where, if test statistics fall, the null hypothesis is rejected in favor of the alternative hypothesis in hypothesis testing.

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