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What is the sacrifice ratio? Consider an economy with a natural unemployment rate, , of 8%. The expectations-augmented Philips curve is: * * * -
What is the sacrifice ratio?
Consider an economy with a natural unemployment rate, , of 8%. The expectations-augmented Philips curve is: * * * - 2u - u) Assume that Okun's Law holds so that a 1 percentage point Increase in the unemployment rate maintained for one year reduces GDP by 2% of full employment output. Note: Okun's Law can be expressed as: Y- -214-) a. Consider a two-year disinflation. In the first year actual inflation, X, is 10% and expected inflation, , is 14% What is the first year unemployment rate? 100% (Enter your response as a percentage rounded to one decimal place) By what percentage does output exceed full employment output? - 4.0% (Your answer should be a negative number if output is less than full employment output. Enter your response as a percentage rounded to one decimal place) b. In the second year actual Inflation, is 3% and expected Inflation, s is 3%. What is the second year unemployment rate? 8.0 % (Enter your response as a percentage rounded to one decimal place) By what percentage does output exceed full employment output? 0.0 % (Your answer should be a negative number if output is less than full employment output. Enter your response as a percentage rounded to one decimal place.) What is the sacrifice ratio for this disinflation (Enter your response rounded to two decimal places, use only positive values) Step by Step Solution
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