Compute the rate of inflation for years plus two

Reference no: EM133665901

Problem: For this problem, use the "Modified" Phillips relation we saw in class: πt=πteplus0.25minus4ut. let πte=π(t-1). Suppose that inflation in year - 1 is zero. In year t, the authorities decide to keep the unemployment rate at 5% forever. Compute the rate of inflation for year's + 2.

Reference no: EM133665901

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