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Assume the Phillips curve is given by the simple equation, where I is inflation rate and U is unemployment rate. U = -I + 20.
Assume the Phillips curve is given by the simple equation, where I is inflation rate and U is unemployment rate. U = -I + 20. The NAIRU is 10 percent. Assume that initially economy is in the long-run equilibrium. a. If inflation changes to 15 percent, what will be the unemployment rate in the short run? Instructions: Enter your answer as a whole number. This change can be shown as a an upward movement along the short-run Phillips curve. b. What would be unemployment rate equal to in the long run? Instructions: Enter your answer as a whole number. This change can be shown as a (Click to select) the short-run Phillips curve
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