Inflation and unemployment by using philips curve

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1. Explain relationships between inflation and unemployment by using the Philips curve.

2. Suppose that people expect inflation to be equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups.

a. a homeowner with a fixed-rate mortgage

b. a union worker with a fixed labor contract

c. a company that has invested some of its endowment in government bond which pay fixed rate of return.

Reference no: EM132813459

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