1. (1)Social loss function is L=(u-5)^2+(pi-2)^2. Suppose u=7 and pi=8, social loss L=______ (2)Using the same social loss function as above. If the gov't has the freedom to select any u and pi they want, then the minimum (smallest) social loss we can achieve is L= ____

2. Social loss is L=(u-5)^2+(pi-2)^2 Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public. If gov't is honest, then gov't best choice of pi is: pi=___

3. Social loss is L=(u-5)^2+(pi-2)^2 Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public. If gov't is honest, then the smallest social loss possible is L=_____