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Unformatted text preview: (e) What does the expectations-augmented Phillips curve imply for the trade off between unemployment and inflation faced by policymakers? 3. (a) How can an increase the average duration of unemployment lead to a higher unemployment rate? (c) Discuss how a reduction in unemployment insurance benefits can reduce unemployment. Are there reasons why such a reduction could increase long-run aggregate output? 4. Why do some economists consider uncertainty to be the primary cost of inflation? 5. Explain how the Bank of Englands policy of inflation targeting is related to the expectations augmented Phillips curve....
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- Spring '12