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The data below represents inflation and unemployment rates over a period of time for an imaginary country. The data points have been plotted and the
The data below represents inflation and unemployment rates over a period of time for an imaginary country. The data points have been plotted and the short-term Phillips Curve with a downward slope is shown. Based on the provided data and visual graph, reposition the vertical curve which represents the long-run Phillips curve on the natural rate of unemployment. We are assuming the natural rate of unemployment just happens to be also the most frequent value in the table (which is a coincidence). Year 1920 1925 1930 1935 1940 1945 1950 1955 Unemployment Rate 3% 3% 7% 8% 3% 6% 3% 4% Inflation Rate 3% 4% 2% 4% 5% 4% 8% 1%
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