
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Hi, please help on this macroecons question. Thank you

Transcribed Image Text:IV) Suppose that an economy has the Phillips curve:
n = n° -0.4*(u – 0.04)
a. What is the natural rate of unemployment?
b. Graph the short-run and long-run relationship between inflation and
unemployment?
c. Assume that agents have adaptive expectations. How much cyclical
unemployment is necessary to reduce inflation by 5 percentage points? Using
Okun's law, compute the sacrifice ratio.
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