Which of the following equations summarize the analysis of Friedman and Phelps (where a is positive number)?
A)unemployment rate = natural rate of unemployment - a(actual inflation - expected inflation)
B)unemployment rate = natural rate of unemployment - a(expected inflation - actual inflation)
C)unemployment rate = expected rate of inflation - a(actual inflation - expected inflation)
D)unemployment rate = actual rate of inflation - a(actual unemployment - expected unemployment)

Question

Quizplus · Accepted Answer

Friedman and Phelps derived the equation stating that the unemployment rate is equal to the natural rate of unemployment minus the coefficient (a) multiplied by the difference between the actual inflation rate and expected inflation rate. The correct equation is: Unemployment rate = Natural rate of unemployment - a (Actual inflation rate - Expected inflation rate). Option A is the only choice that matches this equation.

Which of the Following Equations Summarize the Analysis of Friedman