The document discusses the effects of an increase in market power (m) of producers from 1% to 2% in an accelerationist Phillips curve model. If m increases, the Phillips curve will shift upward and inward, the natural rate of unemployment will increase, and the natural rate of interest will decrease.
onsider the accelerationist Phillips Curve. z is 2, is 1 , and t.pdf
1. onsider the accelerationist Phillips Curve. z is 2%, is 1 , and the unemployment rate is 5%. a)
Explain what happens to the Phillips curve if m, the market power of producers, increases from
1% to 2%. You can describe the change either using a graph, or in words [10 points] b) Explain
what happens to the natural rate of unemployment if m, the market power of producers, increases
from 1% to 2%. [10 points]
c) Explain what happens to the natural rate of interest of the economy if m, the market power of
producers, increases from 1% to 2%. [10 points]