Current output is $42,000. Potential output is $40,000. Expected inflation is 3%. The responsiveness of wage growth to a change in unemployment is 0.5. The
Current output is $42,000. Potential output is $40,000. Expected inflation is 3%. The responsiveness of wage growth to a change in unemployment is 0.5. The responsiveness of output to unemployment is 1.5. The current aggregate price index is $200. What would we expect the price index to be in the next period? What percentage change is this? Is the change higher or lower than expected inflation
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