a) Define Philips curve. (2 marks) b) Suppose an economy has the following Philips curve: = -0.5(u - 0.06). Where; , is the rate of inflation at time t, and u is the rate of unemployment. What is the natural rate of unemployment in this economy? (4 marks) How much of cyclical unemployment is necessary to reduce inflation by 5% points? i) ii) (2 marks) iii) Calculate the sacrifice ratio in the above (i) and (ii) case. (2 marks) c) Discuss the main macroeconomic policy objectives that any responsible government would strive to achieve. (10 marks)