In the expectations-augmented Phillips curve,π = π^e - 3(u - 0.06).When π = 0.06 and π^e = 0.03,the unemployment rate is A)0)04. B)0)05. C)0)06. D)0)07.

Question

Quizplus · Accepted Answer

Substitute the given values into the Phillips curve equation:
0.06 = 0.03 - 3(u - 0.06)
0.06 - 0.03 = 0.18 - 3u
0.03 = 0.18 - 3u
3u = 0.15
u = 0.05
Thus, the unemployment rate is 0.05, which corresponds to answer choice B.

In the Expectations-Augmented Phillips Curve,π = πe - 3(u -

In the Expectations-Augmented Phillips Curve,π = π^e - 3(u -