3. In the game between the Fed and the firms shown diagrammatically in Fig. 14.10(b), what happens...
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3. In the game between the Fed and the firms shown diagrammatically in Fig. 14.10(b), what happens if the Fed doesn't value having the unemployment rate below the natural rate, II? Specifically, assume that the Fed assigns 0 points to a situation in which u equals II and assigns -1 points to a situation in which u is either above or below II. How does this modification affect the outcome of the game? (Assume that if the Fed is indifferent between two actions, it chooses the one that makes the firms better off.)
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