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The inflation-expectations-augmented Phillips curve implies that O the inflation rate is equal to the real output growth rate plus the monetary growth rate O the
The inflation-expectations-augmented Phillips curve implies that O the inflation rate is equal to the real output growth rate plus the monetary growth rate O the expected inflation rate is always equal to the monetary growth rate O expected inflation is the same as last period's inflation unemployment is at its natural rate when expected inflation is equal to actual inflationSuppose the Fed has a target inflation rate of 2%, the Fed always hits its target, and the inflation rate has been 2% for several years. Furthermore, assume Amazon sets the price of a Ravensburger puzzle at $30 in 2021 and wants to keep the real price of the puzzle constant. Now suppose that the Fed announces on January 1, 2022 that it will increase its target rate for inflation to 3%. If Amazon has adaptive expectations, it will set its price for the puzzle in 2022 at ___, however, if Amazon has rational expectations, it will set its price for the puzzle in 2022 at O $29.98; $30.60 $30.60; $30.90 O $28.98; $30.30 $30.30; $31.50
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