5. a. The Phillips curve is πt = πt^e+ (m + z) – αut Rewrite this...

5. a. The Phillips curve is πt = πt^e+ (m + z) – αut

Rewrite this relation as a relation between the deviation of the unemployment rate from the

natural rate of unemployment (NRU), inflation and expected inflation.

b. When we derived the natural rate of unemployment using the wage setting and price setting

equations, what condition on the price level and expected price level was imposed in part a?

c. How does the NRU vary with the markup?

d. How does the NRU vary with the catchall term z?

e. Identify two important sources of variation in the NRU across countries and across time.

Expert Solution

Rahul Sunny answered 2 years ago

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