Question

Assuming that there is no long-run relationship between the inflation rate and unemployment. If this is true, then why is it that people pay such close attention to every move made by the Fed?

Answer 1

Ans:-

• It demonstrates connection among joblessness and swelling in long run .
• It drawn lay joining harmony purposes of the economy as achieves enduring state after short run aggravations .
• Therefore long run Philips bend is vertical at characteristic rate of joblessness .
• Over the long haul change in economy happens in such way it returns to regular rate of joblessness .
• At more elevated amount of swelling in the event that it is acclimating to an expansionary strategy and lower dimension of swelling .
• It is changing in accordance with constriction arrangements if all of relentless state joined to such an extent that expansion is consistent state comparing to joblessness .
• It will dependably compare to NAIRU which result is keeping long run Philips bend vertical .
• People give careful consideration to each move the fed in light of the fact that over the long haul it will be at more elevated amount of swelling .
• It is changing in accordance with an expansionary arrangement and it will be at lower dimension of expansion on the off chance that it is acclimating to withdrawal strategy .Hence the consideration.