a) Collect monthly data on inflation (Consumer Prices, Annual Inflation- growth on the same period of the previous year) and unemployment rate 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 to answer the following questions:

i) Plot line diagrams for both the countries for the respective time period. (2 points)

ii) Was the disinflation costly (in terms of rising unemployment)? (2 + 2 = 4 points)

[Hint: Plot line diagrams separately for each country, while each will include the inflation and the unemployment rate.]

iii) Does the data provide evidence that inflation expectations were being formed rationally during this period? Explain. (3 points)

iv) 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. (4 points) *Attach the data along with your answer.