Suppose that the Phillips curve is given by -* = 0.1- 1-2 Ut, where x=4-1 Suppose that inflation in year (t-1) is zero. In year t, the central bank decides to keep the unemployment rate at 4% forever. Now suppose that half the workers have indexed labor contracts. Now, in year t, the inflation rate will be%. (Enter your response as an integer.) In year (t + 1), the inflation rate will be%. (Enter your response as an integer.) In year (t + 2), the inflation rate will be%. (Enter your response as an integer.) In year (t + 3), the inflation rate will be %. (Enter your response as an integer.) What is the effect of wage indexation on the relation between it and u? OA. As indexation rises, inflation becomes more sensitive to the gap between the unemployment rate and natural rate. OB. As indexation increases, inflation becomes less sensitive to the actual level of the unemployment rate. OC. As indexation rises, inflation becomes less sensitive to the gap between the unemployment rate and natural rate. OD. As indexation increases, inflation becomes more sensitive to the actual level of the unemployment rate.

Suppose that the Phillips curve is given by -* = 0.1- 1-2 Ut, where x=4-1 Suppose that inflation in year (t-1) is zero. In year t, the central bank decides to keep the unemployment rate at 4% forever. Now suppose that half the workers have indexed labor contracts. Now, in year t, the inflation rate will be%. (Enter your response as an integer.) In year (t + 1), the inflation rate will be%. (Enter your response as an integer.) In year (t + 2), the inflation rate will be%. (Enter your response as an integer.) In year (t + 3), the inflation rate will be %. (Enter your response as an integer.) What is the effect of wage indexation on the relation between it and u? OA. As indexation rises, inflation becomes more sensitive to the gap between the unemployment rate and natural rate. OB. As indexation increases, inflation becomes less sensitive to the actual level of the unemployment rate. OC. As indexation rises, inflation becomes less sensitive to the gap between the unemployment rate and natural rate. OD. As indexation increases, inflation becomes more sensitive to the actual level of the unemployment rate.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 8SQP

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