Question
Suppose we consider a Phillips Curve that has a = 0.5. Also inflation was 1% last year in the economy and the output gap was
Suppose we consider a Phillips Curve that has a = 0.5. Also inflation was 1% last year in the economy and the output gap was 0% and there are no shocks. Assume adaptive expectations.
a) What is the current inflation rate this year?
b) Now assume everything is the same except the output gap is -5%. What is current inflation this year in this situation?
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Financial Accounting
Authors: C Thomas,
12th Edition
007760086X, 9780077600860
