1)Social loss is L=(u-5)^2+(pi-2)^2 Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public. If gov't is honest, then gov't best choice of pi is: pi=___ (2)Social loss is L=(u-5)^2+(pi-2)^2 Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public. If gov't is honest, then the smallest social loss possible is L=_____
1)Social loss is L=(u-5)^2+(pi-2)^2 Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public. If gov't is honest, then gov't best choice of pi is: pi=___ (2)Social loss is L=(u-5)^2+(pi-2)^2 Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public. If gov't is honest, then the smallest social loss possible is L=_____
Chapter13: Inflation
Section: Chapter Questions
Problem 7SQP
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1.(1)Social loss is L=(u-5)^2+(pi-2)^2
Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public.
If gov't is honest, then gov't best choice of pi is: pi=___
(2)Social loss is L=(u-5)^2+(pi-2)^2
Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public.
If gov't is honest, then the smallest social loss possible is L=_____
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