Question: Suppose that the Phillips curve is given by 7ft = it? + 0.12 Zut and expected ination is given by are = ' , where

Suppose that the Phillips curve is given by 7ft = it? + 0.12 Zut and expected ination is given by are = ' , where 7? is constant at 1%. Suppose that the rate of unemployment is initially equal to the natural rate. In year r, the authorities decide to bring the unemployment rate down to 3% and hold it there forever. What is the ination rate at r + 3

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