Currently in the US, inflation as measured by the CPI, is about 1.5% and u is about 7.6%; assume that US un= 6%.
Present the appropriate equation(s) (no need to provide all data, just fill in what you can given information above) and best graph to illustrate this u-inflation situation given the following questions. Make all assumptions clear.
a. Can you say whether or not actual inflation is equal to expected inflation? Why or why not? Explain.
b.Can you say whether or not inflation will rise or fall from its current amount, cet par? Why or why not? Explain.