(Solved): 5. Expectations and the modern view of the Phillips curve The following graph shows the short-run P ...

5. Expectations and the modern view of the Phillips curve The following graph shows the short-run Phillips curve within the expectations framework. On the graph, place the grey star point to tilustrate the situation when people accurately antidpate the inflation rate. ACTUAL MINUS EXPECTED RATE OF INFLATION (Percerti) When people accurately anticipate the inflation rate, the natural rate of unemployment is On the previous graph, place the black cross point to illustrate the situation when people underestimate inflation by $4\%$. When people overestimate inflation, the resulting unemployment rate is the natural rate. True or False: The modern view of the Phillips curve indicates that to keep the unemployment rate low, policymakers should rapidly increase inflation rates. True False