Suppose that the level of unemployment in the economy is determined by the follow equation: U = 6.72 - 1.97*(i - i) Where U is the unemployment rate, i is the actual inflation rate, and it is the expected inflation rate. All variables are entered in percentage form (e.g. if inflation is 30.57%, you plug in 30.57 for i, not 0.3057). Last year, the inflation rate was 5.7%, and people have adaptive expectations. What does the inflation rate need to be this year in order for the unemployment rate to be 3.46%? Note: Everything is already in percentage form. You do not need to multiply or divide by 100 at any point. Enter in your answer as it is calculated in the equation. Round your final answer to two decimal places.

Suppose that the level of unemployment in the economy is determined by the follow equation: U = 6.72 - 1.97*(i - i) Where U is the unemployment rate, i is the actual inflation rate, and it is the expected inflation rate. All variables are entered in percentage form (e.g. if inflation is 30.57%, you plug in 30.57 for i, not 0.3057). Last year, the inflation rate was 5.7%, and people have adaptive expectations. What does the inflation rate need to be this year in order for the unemployment rate to be 3.46%? Note: Everything is already in percentage form. You do not need to multiply or divide by 100 at any point. Enter in your answer as it is calculated in the equation. Round your final answer to two decimal places.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 14SQ

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