Question

2. Suppose that the Phillips curve is given by π_t-π_t-1=0.1-1.4 u_t and inflation in year t-1 is zero. In year t, the authorities decide to keep the unemployment rate at 5% forever. Given this information, what is the rate of inflation for year t+1? a. 3% b. 4% c. 5% d. 6% e. 7% 7. Suppose that the Phillips curve is given by π_t-π_t-1=0.1-1.4 u_t and inflation in year t-1 is 2%. In year t, the authorities decide to keep the unemployment rate at 5% forever. Given this information, what is the rate of inflation for year t+1? a. 2% b. 4% c. 5% d. 6% e. 8%

          2. Suppose that the Phillips curve is given by 
    π_t-π_t-1=0.1-1.4 u_t
 and inflation in year t-1 is zero. In year t, the authorities decide to keep the unemployment rate at 5% forever. Given this information, what is the rate of inflation for year t+1? 
a. 3% 
b. 4% 
c. 5% 
d. 6% 
e. 7% 

7. Suppose that the Phillips curve is given by 
    π_t-π_t-1=0.1-1.4 u_t
 and inflation in year t-1 is 2%. In year t, the authorities decide to keep the unemployment rate at 5% forever. Given this information, what is the rate of inflation for year t+1? 
a. 2% 
b. 4% 
c. 5% 
d. 6% 
e. 8%

Added by John C.

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