a. There is an increase in input prices in the economy. Inflation Rate | Natural Rate of | Unemployment (i) If the economy is initially at point 'B', we need to increase/decrease inflation to return the economy to full employment. (ii) Based on the scenario above, and if people form rational expectations, will they expect inflation rates to increase, decrease, or remain the same in the near future? (iii) Will the short run Phillips curve shift? If so, in which direction? ( iv ) After the shift (if there is one), will the target inflation rate increase, decrease, remain the same? I b. There is an increase in the country's exports. (This shifts aggregate demand in the economy.) Inflation Rate Natural Rate of (i) If the economy is initially at point 'C', we need to increase/decrease inflation to return the economy to full employment. (ii) Based on the scenario above, and if people form rational expectations, will they expect inflation rates to increase, decrease, or remain the same in the near future? (iii) Will the short run Phillips curve shift? If so, in which direction? (iv) After the shift (if there is one), will the target inflation rate increase, decrease, remain the same