6.

a. Examine how each of the following affects the natural unemployment rate.

i. The discovery of new energy resources lowers the price of energy, stimulating more industrial activities.

ii. The current minimum wage is raised by $3, leading to a higher efficiency wage.

iii. An unanticipated contractionary monetary policy brings the economy to a recession.

b. As people demand more jobs, a parliamentary representative says that “if people are willing to tolerate a higher inflation rate than the current inflation rate, the unemployment rate can be lower than the natural unemployment rate permanently.”

Do you agree with the representative?

Use the expectations-augmented Phillips curve to explain your answer.