1. Suppose the firm has sticky prices and adjusts prices infrequently. Under a basic Calvo speci- fication, aggregate inflation is equal to It = BE+ Tit+1 + Kmct, where mct is real marginal cost, expressed as a deviation around its steady-state value. (a) Suppose firms expect marginal costs to increase in the future. Specifically, suppose Etmct+J > 0 but Etmctti = 0 for all j * J. What is the effect on inflation today (i.e., at j = 0)? Explain. (b) Explain how the effect depends on how far out into the future the increase is expected to occur (i.e., how does it depend on J)