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Economics a) The model consists of three equations: Philips curve itt=7tte+y(yt-yt*)+Ett The IS curve yt=yt* -(it-7tt-r*)+Ety Monetary policy rule it=r*+7*+BTt(Tut-7[*) i. Derive and explain the

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Economics a) The model consists of three equations: Philips curve itt=7tte+y(yt-yt*)+Ett The IS curve yt=yt* -(it-7tt-r*)+Ety Monetary policy rule it=r*+7*+BTt(Tut-7[*) i. Derive and explain the IS-MP curve from the equations given above. ii. Describe how the central bank will react if expected inflation is above the central bank targets

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