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Using the Labour Market Phillips Curve, explain the impacts of expansionary monetary policy on the rates of inflation and unemployment. Next, suppose that over time,
Using the Labour Market Phillips Curve, explain the impacts of expansionary monetary policy on the rates of inflation and unemployment. Next, suppose that over time, expected inflation changes in the same direction that actual inflation changes. Illustrate the impact of this change in expectations in your previous diagrams. What happens to the output gap and the rate of unemployment as expectations change
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