6. (20 point) Suppose the tradeoff between unemployment and inflation is determined by the Phillips Curve: u= ul-a(1-E), where u denotes the unemployment rate, u the natural rate, the inflation rate, Ex the expected rate of inflation. In addition, suppose the Argo's Party always follows a policy of high money growth and the Bambi's Party always follows of low money growth. What "political business cycle pattern of inflation and unemployment would you predict under the following conditions? Explain. a. Every four years, Ye of the parties take control based on a random flip of a coin. b. The two parties tal Font 7. (20 point) Curious George argues that his proposal would improve economy. He proposes both a decrease tax by $300 billion and a decrease government spending by $300 billion at the same time. This is from one of his TV interviews: "The combination of tax cut and government spending cut will increase the level of investment in the economy. It's not what I just believe, it is what economists are saying." Curious George won the accolade of conceiving and proposing a policy. Now, is his argument correct? If so, how much would investment increase? Explain if his argument is correct or not. And how much would be the changes of national savings and investment? Show your calculation Use Neoclassical Model, developed in Module 1. It is assumed that consumption function is c = 500+ 0.6 (Y-T). Everything else is assumed to be constant. Focus