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Assume that the Phillips curve is given as t = t e + 0.1 - 3 t , where t e = t - 1.

Assume that the Phillips curve is given as t = te + 0.1 - 3t , where te= t - 1. Suppose that only for the first two periods (t = 1 and t = 2) do people form expectations using = 0. From t =3 and then, set = 1 forever.The government wants to keep the unemployment rate at 2%.What is the expected inflation for t = 4?

A. 2%

B. 4%

C. 8%

D. 12%

E. 16%

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