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Business, 02.08.2019 18:30 aliyahedwards94

Suppose that the phillips curve is given by pi subscript t baseline minus pi subscript t superscript e baseline equals 0.08 plus 0.1 mu subscript t minus 2 u subscript tπt−πet=0.08+0.1 μt−2 ut where muμ is the markup of prices over wages. suppose that muμ is initially equal to 20%, but that as a result of a sharp increase in oil prices, muμ increases to 40% in year t and after. why would an increase in oil prices result in an increase in muμ? a. a higher cost of production means changes in technology, which will alter the markup. b. a higher cost of production changes the natural rate of unemployment. c. a higher cost of production changes inflationary expectations and thus the markup. d. a higher cost of production means a higher markup of the price level over wages. what is the effect of the increase in muμ on the natural rate of unemployment? a. the natural rate of unemployment will increase. b. the natural rate of unemployment will decrease. c. the natural rate of unemployment will not change. d. the effect on the natural rate of unemployment cannot be determined without more information

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