Suppose that the Phillips curve is given by +0.1-2 u₂ and expected inflation is given by where 0 is equal to zero and 0.02 and does not change R The economy is initially at the natural rate of unemployment, which is 5%, when the authorities decide to bring the unemployment rate down to 3% and hold it there forever. With 0 equal to zero, this will yield a 6% rate of inflation every year. Now suppose that in year (t+6), 0 changes to 1. 0 might increase in this way because OA government policy would mandate inflationary expectations B. inflation expectations adapt to persistently positive inflation OC inflation expectations change constantly OD inflation expectations always adapt immediately to the last period's inflation. In year (+6), the inflation rate will be % (Ender your response as an integer.) In year (+7), the inflation rate will be % (Enter your response as an integer.) In year (+8), the inflation rate will be%. (Enter your response as an integer.)

Suppose that the Phillips curve is given by +0.1-2 u₂ and expected inflation is given by where 0 is equal to zero and 0.02 and does not change R The economy is initially at the natural rate of unemployment, which is 5%, when the authorities decide to bring the unemployment rate down to 3% and hold it there forever. With 0 equal to zero, this will yield a 6% rate of inflation every year. Now suppose that in year (t+6), 0 changes to 1. 0 might increase in this way because OA government policy would mandate inflationary expectations B. inflation expectations adapt to persistently positive inflation OC inflation expectations change constantly OD inflation expectations always adapt immediately to the last period's inflation. In year (+6), the inflation rate will be % (Ender your response as an integer.) In year (+7), the inflation rate will be % (Enter your response as an integer.) In year (+8), the inflation rate will be%. (Enter your response as an integer.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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