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5. The Phillips curve relates the inflation rate to the expected inflation rate and to the difference between unemployment and its natural rate. So one

5. The Phillips curve relates the inflation rate to the expected inflation rate and to the difference between unemployment and its natural rate. So one way to reduce inflation is

to have a recession, raising unemployment above its natural rate. It is possible to bring

inflation down without a recession, however, if we can costlessly reduce expected inflation.

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