In an expectations-augmented Phillips curve equation, expected inflation rate and natural rate of unemployment are 5% and 4%, respectively. The responsiveness of inflation to the unemployment gap is 0.5. If actual unemployment rate is 5%, then the actual inflation rate (in %) is ________ (rounded off to one decimal place).
IIT JAM 2026 Question 48: Inflation, unemployment and the Phillips curve
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This question is on The expectations-augmented Phillips curve, part of Inflation, unemployment and the Phillips curve in Macroeconomics.
How expected inflation shifts the trade-off and makes it vertical in the long run.
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