If households and firms change from expecting mild, Financial Management

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If households and firms change from expecting mild

1. If households and firms change from expecting mild inflation to expecting mild deflation, how will the Phillips curve shift? Draw an output gap Phillips curve graph to illustrate your answer.

2. The natural rate of unemployment is sometimes referred to as the non accelerating inflation rate of unemployment. Using Phillips curve analysis, if the unemployment rate differs from the natural rate of unemployment, will the inflation rate in the economy change?

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