The Phillips Curve in Lowland Takes the Form Of $\pi$ = 004 - 05 (U - 0

question 46

Essay

The Phillips curve in Lowland takes the form of $\pi$ = 0.04 - 0.5 (u - 0.05), where $\pi$ is the actual inflation rate and u is the unemployment rate. The Phillips curve in Highland takes the form of $\pi$ = 0.08 - 0.5 (u - 0.05). The current unemployment rate in both countries is 9 percent (0.09). a. Explain the similarities in the Phillips curves in Highland and in Lowl and.
b. Explain the difference in the Phillips curves in Highland and in Low and.
c. In which country will policymakers face a bigger tradeoff if they try to reduce unemployment in the short run?

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