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uppose there are two groups in the economy who form their expectations differently. Group 1, whose expectations are denoted as e,1, form their expectations rationally.
uppose there are two groups in the economy who form their expectations differently. Group 1, whose expectations are denoted as e,1, form their expectations rationally. Group 2, whose expectations are denoted as e,2, have unanchored expectations. Let denote the portion of the economy who are in Group 2. That is, we can write the equations that determine the relationship between inflation and unemployment are the following: t = e t (m z) ut e t = (1 )e,1 t e,2 t e,1 t = t e,2 t = t1 Question 2.A. Using the above equations, derive the Accelerationist Phillips Curve: that is, an equation that demonstrates the change in inflation (t t1)
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