General Form: p = p expected + θ [ADSGAP] Specific Function: p = pt–1 + 0.5 [ADSGAP] What are the factors that determine θ, the slope of the short run Phillips Curve? From the ‘transaction costs’ angle, as in Okun, the value of θ will depend on the structure of the economy. If the share of auction/commodity markets in the economy is high, the expansion of nominal GNP demand will mostly go into prices and will not go into output. Vice versa, if the manufacturing and services sectors, which have customer markets with sticky prices, are large. Similarly, if the share of workers locked into
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