c) Suppose that the economy has the following Phillips curve n = T.1 – 0.5 (u-0.06) i. What is the natural rate of unemployment? ii. How much of cyclical unemployment is necessary to reduce inflation by 5 percent points? iii. Using Okun's law, compute the sacrifice ratio iv. inflation is running at 10 percent. The central bank wants to reduce it to 5 percent. Give two scenarios that will achieve that goal

c) Suppose that the economy has the following Phillips curve n = T.1 – 0.5 (u-0.06) i. What is the natural rate of unemployment? ii. How much of cyclical unemployment is necessary to reduce inflation by 5 percent points? iii. Using Okun's law, compute the sacrifice ratio iv. inflation is running at 10 percent. The central bank wants to reduce it to 5 percent. Give two scenarios that will achieve that goal

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Aggregate Supply

Section: Chapter Questions

Problem 1.1P

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