Suppose the Phillips curve is given by the following: Πι = π + (μ + z) – aut 2ut πι = π + 0.1 Where: π} = θπι–1 Suppose initially, 0 = 0 a. What is the natural rate of unemployment? b. Suppose ut = un. In year t, government authorities decide to bring the unemployment rate down to 3% and hold it there forever. Determine the rate of inflation in years t, t+1, t+2.

Suppose the Phillips curve is given by the following: Πι = π + (μ + z) – aut 2ut πι = π + 0.1 Where: π} = θπι–1 Suppose initially, 0 = 0 a. What is the natural rate of unemployment? b. Suppose ut = un. In year t, government authorities decide to bring the unemployment rate down to 3% and hold it there forever. Determine the rate of inflation in years t, t+1, t+2.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter17: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 1SQP

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