Does unemployment depend on the way people form expectations

Reference no: EM13213282

Suppose that the Phillips curve is given by ft-ft^e= 0.1-2ft where ft^e=ft-1 Suppose that inflation in year t-1 is zero. In year t, the authorities decide to keep the unemployment rate at 4% forever. 1. Compute the natural rate of unemployment. Does it depend on the way people form their expectations of inflation?

Reference no: EM13213282

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