An economy has the following Phillips Curve equation: = E-(1/2)(u-7) where represents inflation, Erepresents expected inflation, and urepresents the unemployment rate. a) Assume inflation is equal to expectations at a rate of 2 percent. Calculate the natural rate of unemployment.

b) Assume inflation has been stable at 2 percent, so the public expects 2 percent inflation in the future. Suppose there is unexpectedly high inflation such that the rate rises to 4 percent. Calculate the economy's unemployment rate in this case.

c) Does this result hold in the long run? If not, describe how the equilibrium changes.