Essay
The relationship between inflation and unemployment is given by
? = ?e - 4(u - 
).
(a)Draw a diagram showing a long-run Phillips curve and two short-run Phillips curves that contain the following points:
A: ? = .04,?e = .04
B: ? = .08,?e = .08
C: ? = .04,?e = .08
D: ? = .08,?e = .04
Label points A,B,C,and D in your diagram.
The unemployment rate at point A equals .05.
(b)What are the values of the natural rate of unemployment and the unemployment rates at points B,C,and D?
Correct Answer:
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(a)Long run: vertical line at u 
= 0.05....View Answer
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Correct Answer:
Verified
= 0.05....View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
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