Implications of ExpectationsAugmented Phillips Curve

1. When _e _, Phillips Curve shifts up

2. U deviates from Un only when there are surprises about inflation

Solving above for U

U = Un ñ (_w/w ñ _e)/h

_ substituted for _w/w cause move together

U = Un ñ (_ ñ _e)/h

3. Canít buy U permanently below Un by higher _

In long-run _ = _e: so from eq. above, U = Un

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