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The Relationship Between Inflation and Unemployment Is Given by π

question 17

Essay

The relationship between inflation and unemployment is given by π = πe - 3(u - .06).
a. Graph the short-run and long-run Phillips curves.
b. What is the value of the natural rate of unemployment?
c. If actual inflation is .02 and expected inflation is .05, what is the unemployment rate?
d. If actual inflation is .08 and expected inflation is .05, what is the unemployment rate?


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