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-Using the Figure Above, Explain What Would Happen If the Unemployment

Question 101

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-Using the figure above, explain what would happen if the unemployment rate decreases from the NAIRU to U<sub>1</sub> and stays at U<sub>1</sub> for many periods. Assume that the inflation rate at the NAIRU was 4%.
-Using the figure above, explain what would happen if the unemployment rate decreases from the NAIRU to U1 and stays at U1 for many periods. Assume that the inflation rate at the NAIRU was 4%.

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In the first period the inflat...

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