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6. Expectations and the modern view of the Phillips curve The following graph shows the short-run Phillips curve within the expectations framework. On the graph, place the grey star point to illustrate a situation in which people accurately anticipate the inflation rate. ACTUAL MINUS EXPECTED RATE OF INFLATION (Percent) 0 1 7 2 3 5 6 UNEMPLOYMENT RATE (Percent) 8 9 10 O True Correct expectations When people accurately anticipate the inflation rate, the natural rate of unemployment is O False + (? On the previous graph, place the black cross point to illustrate a situation in which people overestimate inflation by 3%. When people overestimate inflation, the resulting unemployment rate is below the natural rate. 5%. True or False: The modern view of the Phillips curve indicates that to keep the unemployment rate low, policymakers should follow policies consistent with low and steady inflation.

6. Expectations and the modern view of the Phillips curve The following graph shows the short-run Phillips curve within the expectations framework. On the graph, place the grey star point to illustrate a situation in which people accurately anticipate the inflation rate. ACTUAL MINUS EXPECTED RATE OF INFLATION (Percent) 0 1 7 2 3 5 6 UNEMPLOYMENT RATE (Percent) 8 9 10 O True Correct expectations When people accurately anticipate the inflation rate, the natural rate of unemployment is O False + (? On the previous graph, place the black cross point to illustrate a situation in which people overestimate inflation by 3%. When people overestimate inflation, the resulting unemployment rate is below the natural rate. 5%. True or False: The modern view of the Phillips curve indicates that to keep the unemployment rate low, policymakers should follow policies consistent with low and steady inflation.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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6. Expectations and the modern view of the Phillips curve The following graph shows the short-run Phillips curve within the expectations framework. On the graph, place the grey star point to illustrate a situation in which people accurately anticipate the inflation rate. ACTUAL MINUS EXPECTED RATE OF INFLATION (Percent) 1 2 3 4 6 7 UNEMPLOYMENT RATE (Percent) 5 8 O True 9 10 When people accurately anticipate the inflation rate, the natural rate of unemployment is O False Correct expectations (?) On the previous graph, place the black cross point to illustrate a situation in which people overestimate inflation by 3%. When people overestimate inflation, the resulting unemployment rate is below the natural rate. 5%. True or False: The modern view of the Phillips curve indicates that to keep the unemployment rate low, policymakers should follow policies consistent with low and steady inflation.
Transcribed Image Text:6. Expectations and the modern view of the Phillips curve The following graph shows the short-run Phillips curve within the expectations framework. On the graph, place the grey star point to illustrate a situation in which people accurately anticipate the inflation rate. ACTUAL MINUS EXPECTED RATE OF INFLATION (Percent) 1 2 3 4 6 7 UNEMPLOYMENT RATE (Percent) 5 8 O True 9 10 When people accurately anticipate the inflation rate, the natural rate of unemployment is O False Correct expectations (?) On the previous graph, place the black cross point to illustrate a situation in which people overestimate inflation by 3%. When people overestimate inflation, the resulting unemployment rate is below the natural rate. 5%. True or False: The modern view of the Phillips curve indicates that to keep the unemployment rate low, policymakers should follow policies consistent with low and steady inflation.
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