1. Social loss is L=(u-5)^2+(pi-2)^2 Philips curve is u=7-(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 should choose pi =____

2. Social loss is L=(u-5)^2+(pi-2)^2 Philips curve is u=7-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public. If gov't is sophisticated and public is naive, then gov't should announce pi_a =____