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Reciprocal model:

All the estimated coefficients in both the models are individually statistically significant, all the p values being lower than the 0.005 level.

CHAPTER SIX: EXTENSIONS OF THE TWO-VARIABLE LINEAR REGRESSION MODEL 189

Model (6.7.5) shows that if the unemployment rate goes down by i percentage point, on average, the change in the inflation rate goes up by about 0.7 percentage points, and vice versa. Model (6.7.6) shows that even if the unemployment rate increases indefinitely, the most the change in the inflation rate will go down will be about 3.25 percentage points. Incidentally, from Eq. (6.7.5), we can compute the underlying natural rate of unemployment as:

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Rules Of The Rich And Wealthy

Rules Of The Rich And Wealthy

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