Back to the natural rate of Unemployment 0=(u+zau e Solving for the natural rate u Un=(叶z)/α (10.6) e From equation(10.6),aunF(u+z), Replacing(u+z)by aun in equation( 10. 1)and rearranging gives e a(u1- (10.7 n e If the expected rate of inflation( e)is well approximated by last years inflation rate(It-1),the relation finally becomes I tIM1--a(ut -un)(10. 8) To continue 2003-7-202003-7-20 11 Back to the Natural Rate of Unemployment 0 = (μ+z) – αut Solving for the natural rate un : un = (μ+z) / α (10.6) From equation (10.6), αun =(μ+z), Replacing (μ+z) by αun in equation (10.1) and rearranging gives πt -πt e = -α(ut - un ) (10.7) If the expected rate of inflation (πt e ) is well approximated by last year’s inflation rate (πt-1 ), the relation finally becomes πt -πt-1 = -α(ut - un ) (10.8) To continue