ConsidertheinflationandunemploymentdatainthetablebelowfortheUnitedStatesbetween1990and2005.YoumayassumethatOkun'sLawholdstrue(i.e.1%ofunemploymentisapproximatelyequalto2%oflostoutput).Recallthatthesacrificeratioiscalculatedas: Natural Rate Unemployment Unemployment Year U Un Inflation 1990 5.6 6.1 5.4 1991 6.9 6.4 4.2 1992 7.5 6.5 3.0 1993 6.9 6.4 3.0 1994 6.1 6.2 2.6 1995 5.6 5.8 2.8 1996 5.4 5.4 3.0 1997 4.9 5.0 2.3 1998 4.5 4.8 1.6 1999 4.2 4.6 2.2 2000 4.0 4.6 3.4 2001 4.7 4.8 2.8 2002 5.8 4.9 1.6 2003 6.0 5.0 2.3 2004 5.5 5.1 2.7 2005 5.1 5.2 3.4

Sacrifice ratio: LostOutput/ change inInflation Usingthedataabove,calculatethesacrificeratiofortheUSeconomybetweenthe19902005period.Whatvaluewouldthesacrificeratiobeunderadaptiveexpectations?Whatvaluewoulditbeunderrationalexpectations?Basedontheansweryoucalculatedabove,canyousayanythingaboutwhetherpeopleintheeconomyformexpectationsbasedonrationalexpectationsoradaptiveexpectations?