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Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869 Exercise 8
Markups, unemployment, and inflation Suppose that the Phillips curve is given by 
Suppose that unemployment is initially at its natural rate. Suppose now that p increases as a result of an oil price shock, but that the monetary authority continues to keep the unemployment rate at its previous value.
a. What will happen to inflation
b. What should the monetary authority do instead of trying to keep the unemployment rate at its previous value
Suppose that unemployment is initially at its natural rate. Suppose now that p increases as a result of an oil price shock, but that the monetary authority continues to keep the unemployment rate at its previous value.
a. What will happen to inflation
b. What should the monetary authority do instead of trying to keep the unemployment rate at its previous value
Explanation
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(a) If the Federal Reserve keeps the une...
Macroeconomics 5th Edition by Olivier Blanchard
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