The Relationship Between Inflation and Unemployment Is Given by

question 65

Essay

The relationship between inflation and unemployment is given by
π = π^e - 4(u - ).
(a)Draw a diagram showing a long-run Phillips curve and two short-run Phillips curves that contain the following points:
A: π = .04,π^e = .04
B: π = .08,π^e = .08
C: π = .04,π^e = .08
D: π = .08,π^e = .04
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?

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Definitions:

Polar Latitudes

Regions near the poles of the Earth, characterized by extreme cold and seasonal variations in daylight.

Equatorial Latitudes

The region near the equator, characterized by a hot climate year-round due to receiving the most direct sunlight.

Temperate Latitudes

Regions of the Earth lying between the tropics and the polar circles, characterized by moderate temperatures and distinct seasonal changes.

Pollutants

Substances that contaminate the environment, causing harm or discomfort to organisms.