The graph shows the Short Run Phillips Curve (SRPC) in relation to the unemploym
ID: 1241335 • Letter: T
Question
The graph shows the Short Run Phillips Curve (SRPC) in relation to the unemployment rate and the inflation rate. 1. Please move the SRPC line below to reflect an expectation in the economy that inflation Id increase by 2%. Then, please answer the next two questions that follow. Considering the SRPC prior to the 2% increase in inflation, what is the unemployment rate if the public expects no inflation in the economy? In the Iong run, inflationary expectations are incorporated into the publics' decisions. What will happen to the unemployment rate on the long-run Phillips curve as compared to the unemployment rate in Question 2?Explanation / Answer
1. 3% 2.INCREASE
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