Suppose that the Phillips curve is given by -* = 0.1- 1-2 Ut, where x=4-1 Suppose that inflation in year (t-1) is zero. In year t, the central bank decides to keep the unemployment rate at 4% forever. Now suppose that half the workers have indexed labor contracts. Now, in year t, the inflation rate will be%. (Enter your response as an integer.) In year (t + 1), the inflation rate will be%. (Enter your response as an integer.) In year (t + 2), the inflation rate will be%. (Enter your response as an integer.) In year (t + 3), the inflation rate will be %. (Enter your response as an integer.) What is the effect of wage indexation on the relation between it and u? OA. As indexation rises, inflation becomes more sensitive to the gap between the unemployment rate and natural rate. OB. As indexation increases, inflation becomes less sensitive to the actual level of the unemployment rate. OC. As indexation rises, inflation becomes less sensitive to the gap between the unemployment rate and natural rate. OD. As indexation increases, inflation becomes more sensitive to the actual level of the unemployment rate.

Suppose that the Phillips curve is given by -* = 0.1- 1-2 Ut, where x=4-1 Suppose that inflation in year (t-1) is zero. In year t, the central bank decides to keep the unemployment rate at 4% forever. Now suppose that half the workers have indexed labor contracts. Now, in year t, the inflation rate will be%. (Enter your response as an integer.) In year (t + 1), the inflation rate will be%. (Enter your response as an integer.) In year (t + 2), the inflation rate will be%. (Enter your response as an integer.) In year (t + 3), the inflation rate will be %. (Enter your response as an integer.) What is the effect of wage indexation on the relation between it and u? OA. As indexation rises, inflation becomes more sensitive to the gap between the unemployment rate and natural rate. OB. As indexation increases, inflation becomes less sensitive to the actual level of the unemployment rate. OC. As indexation rises, inflation becomes less sensitive to the gap between the unemployment rate and natural rate. OD. As indexation increases, inflation becomes more sensitive to the actual level of the unemployment rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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