Suppose the inflation rate has been 5 percent for the past four years. The unemployment rate is
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Suppose the inflation rate has been 5 percent for the past four years. The unemployment rate is currently at the natural rate of unemployment of 4.5 percent. The Federal Reserve decides that it wants to permanently reduce the inflation rate to 3 percent. How can the Fed use monetary policy to achieve this objective? Be sure to use a Phillips curve graph in your answer.
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