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7. Expectations and the Phillips curve The following graph shows an economy in long-run equilibrium at point A (grey star symbol). The vertical line is

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7. Expectations and the Phillips curve The following graph shows an economy in long-run equilibrium at point A (grey star symbol). The vertical line is the long-run Phillips curve (LRPC). The downward-sloping curve labeled SRPCi is the short-run Phillips curve passing through point A. SRPC. LRPC B O SRPC, INFLATION RATE (Percent) O C 2 3 7 UNEMPLOYMENT RATE (Percent)

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