Consider the Phillips curve presented in class:

=

(

)

{"version":"1.1","math":"${}_t={}_t^e-(u-u_n)$"}. Assume that expected inflation is

based on the following:

=

1

{"version":"1.1","math":"${}_t^e={}_{t-1}$"}. An increase in will cause:

Group of answer choices

no change in the natural rate of unemployment.

an increase in the natural rate of unemployment.

a reduction in the natural rate of unemployment.

inflation in period t to be more responsive to changes in unemployment in period t