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Q. Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a nation such as Japan that has had very little inflation in recent memory, it will take longer for a change in actual inflation rate to be reflected in a corresponding change in expected inflation rate. In contrast, in a nation such as Argentina, one that has recently had very high inflation, a change in actual inflation rate will immediately be reflected in a corresponding change in expected inflation rate. Illustrate what does this imply about short-run and long-run Phillips curves in se two types of countries? Illustrate what does this imply about effectiveness of monetary and fiscal policy to reduce unemployment rate?
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