Refer to the information provided in Figure 13.7 below to answer the questions that follow. Figure 13.7
-Refer to Figure 13.7. If the economy is on SRPC₃, then the expected inflation rate is

Question

Refer to the information provided in Figure 13.7 below to answer the questions that follow. Figure 13.7 -Refer to Figure 13.7. If the economy is on SRPC₃, then the expected inflation rate is

Quizplus · Accepted Answer

On SRPC₃, the economy is at the intersection of the short-run Phillips curve (SRPC) and the long-run Phillips curve (LRPC) at point B1, where the unemployment rate is at its natural rate of 5% and the inflation rate is 1% above the expected inflation rate. The expected inflation rate can be calculated as the vertical distance between SRPC1U1 and LRPC, which is approximately 4%. Therefore, the answer is A) 4%.

Refer to the Information Provided in Figure 13