Suppose that an economy has the Phillips curve p = p-1 - 0.5(u - u^n), and that the natural rate of unemployment is given by an average of the past two years’ unemployment: u^n = 0.5(u-1 + u-2). 1) Why might might the natural rate of unemployment depend on recent unemployment (as is assumed in the preceding equation)?

The non-accelerating inflation rate of unemployment (NAIRU) is the specific level of unemployment that is evident in an economy that does not cause inflation to increase. In other words, if ... Suppose that the Phillips curve is given by: is pi_t = p_t^e + 0.12 - 2u_t What is the Natural Rate of Unemployment (NRU) according to this Phillips Curve equation? Suppose that expected inflation is given by: pi_t^e = (1 - Phi) pi bar + Theta pi_t - 1 and that initially theta = 0 and pi bar is given and does not change.

Oct 22, 2008 · Suppose that an economy has the Phillips curve i1 = i0 - 0.5(u - un) Where: i1 = inflation i0 = inflation last year (u - un) = cyclical unemployment and that the natural rate of unemployment is given by an average of the past two years’ unemployment: un = 0.5(u-1 + u-2) Where: u-1 = unemployment last year u-2 = unemployment two years ago Now for the questions...

focusing particularly on the natural rate hypothesis. The second half concentrates on the rational expec- tations idea, currently the most hotly-debated aspect of Phillips curve analysis. Early Versions of the Phillips Curve Phillips curve analysis has evolved through at least five major