Collect data on inflation and unemployment for the UK and the US during the 1970s and 1980s using OECD.Stat. The 1980s was a period of significant disinflation for the two economies. Use the data gathered and the content of this chapter to answer the following questions:

(a) Was the disinflation costly (in terms of rising unemployment)?

(b) Does the data provide evidence that inflation expectations were being formed rationally during this period?

(c) How can the concept of anchored expectations be used to suggest what the UK and US governments could have done to reduce the costs associated with disinflation.