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In: Economics

Using the Phillips curve diagram and in words, illustrate what happens to the short-run/long-run Phillips curve...

Using the Phillips curve diagram and in words, illustrate what happens to the short-run/long-run

Phillips curve (inflation and unemployment) when the economy faces a “tight” labor market

(actual unemployment rate is below the natural rate). Make sure you properly label all the axes

and curves. Hint: Differentiate between short-run and long-run and think how this affects the

inflation expectations.

Solutions

Expert Solution

Answer - I’ve explained the answer in 4 images. Refer to them according to the mentioned numbers

Rahul Sunny answered 6 months ago
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