Answer to Question #68108 in Macroeconomics for Frances Fitzgerald
πt = current rate of inflation
πt^E = expected rate of inflation
>>> Calculate the natural rate of unemployment rate (Un)
>>> Now, assume that inflation has been lower than expected by 2 percent points. Calculate the current unemployment rate and the natural unemployment rate.
Your equation is represented in this way: Pt=Pte-4Ut+0.2.
A) Comparing these two Philips curves I came to the conclusion that in your economy natural rate of unemployment is absent, it just means Ut*=0.
B) Form your data we can resume that Pte-Pt is equal to 2 %, so putting it into the equation you have represented and doing some mathematical operations we will get that Ut=0.6, which means that in your economy the unemployment rate at time t is equal to 0.6% and again Ut*=0%.
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