What effect did financial crisis have on unemployment rate

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Consider the following version of the Phillips curve: pi t = pi ct- 0.5 (u-u*)2 + v. Suppose that the expectations are 1.5% and the natural rate is 5% Then the economy is hit by an oil price shock and a financial crisis. The oil price shock embodied an inflation rise of 3 percentage points and inflation turned out to be 1.5%. What effect did the financial crisis have on the unemployment rate?

Reference no: EM13155728

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