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In: Economics

When answering parts a and b, draw the relevant Phillips curve. Using a short-run Phillips curve,...

When answering parts a and b, draw the relevant Phillips curve.

  1. Using a short-run Phillips curve, what is the effect on the unemployment rate if the inflation rate unexpectedly rises.
  2. Using a long-run Phillips curve, what is the effect on the unemployment rate if the inflation rate rises and people expect the rise.
  3. Explain how your answer to part a about the unexpected rise in the inflation rate changes in part b as the inflation rate becomes expected.

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Expert Solution

Rahul Sunny answered 2 years ago
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