Suppose that 75% of the workers have indexed labour contracts. The Phillips curve is given by...

 

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Suppose that 75% of the workers have indexed labour contracts. The Phillips curve is given by π = + 0.10- 2u. Expected inflation is given by n = (1-0) + 0-1 where is assumed to be one. Suppose that the rate of unemployment is initially equal to the natural rate. In year t, Tt-1 is assumed to be 2% and the authorities decide to bring the unemployment rate down to 3% and hold it there forever. What is the inflation rate at t + 3? a. 34% b. 66% c. 50% d. 18% e. All of the answers here are incorrect Suppose that 75% of the workers have indexed labour contracts. The Phillips curve is given by π = + 0.10- 2u. Expected inflation is given by n = (1-0) + 0-1 where is assumed to be one. Suppose that the rate of unemployment is initially equal to the natural rate. In year t, Tt-1 is assumed to be 2% and the authorities decide to bring the unemployment rate down to 3% and hold it there forever. What is the inflation rate at t + 3? a. 34% b. 66% c. 50% d. 18% e. All of the answers here are incorrect

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