Use the graphing tool below to answer the following questions. The answers can be downloaded at the bottom of the page.
Draw a long run Phillips curve with a 4% natural rate of unemployment. On the same diagram draw a short run Phillips curve with an expected inflation rate of 2%.
On the diagram show what happens to unemployment when actual inflation is 1%.
On the diagram show what happens to unemployment when inflationary expectations rise to 4%.
Chapter 26 Graphical Question
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Graphing tool instructions
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