The Phillips Curve in Lowland Takes the Form π =

Essay

The Phillips curve in Lowland takes the form π = 0.04 - 0.5 (u - 0.05), where π is the actual inflation rate and u is the unemployment rate. The Phillips curve in Highland takes the form π = 0.08 - 0.5 (u - 0.05). The current unemployment rate in both countries is 9 percent (0.09).
a. Explain the similarities in the Phillips curves in Highland and in Lowland. b. Explain the difference in the Phillips curves in Highland and in Lowland.
c. In which country will policymakers face a bigger tradeoff if they try to reduce unemployment in the short run?