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Question: In each of the scenarios listed below, estimate the unemployment rate in comparison to the natural rate (u*).

a. Inflation is steady at 2% for two years but then increases to 5% for a year.

b. Inflation is steady at 10% for two years but then decreases to 5% for a year.

c. Inflation is steady at 8% for several years.

d. Inflation is steady at 2% for three years, and then the Fed announces that inflation will be 3% one year later.

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Category:- Basic Finance
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