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Assume that the Phillips curve is given as t = t e + 0.1 - 3 t , where t e = t - 1.
Assume that the Phillips curve is given as t = te + 0.1 - 3t , where te= t - 1. Suppose that only for the first two periods (t = 1 and t = 2) do people form expectations using = 0. From t =3 and then, set = 1 forever.The government wants to keep the unemployment rate at 2%.What is the expected inflation for t = 4?
A. 2%
B. 4%
C. 8%
D. 12%
E. 16%
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