Equations 1 to 3 set out a simple model of inflation dynamics that assumes that productivity affects wages and prices symmetrically. In this case, an acceleration in productivity has no effect on the relationship between inflation and the unemployment rate. 1. 2.
3.  w = a + q - b U + pe p=w-q p = a - b U + pe  w = rate of increase in nominal labor compensation p = inflation pe = expected inflation q = trend productivity growth q*= moving average of trend productivity growth U = unemployment rate Equation 1 is a wage-price specification of the Phillips curve.