Now, consider the case where the inflation expectations are de-anchored. Assume the expected inflation is based on last year's inflation rate "-1 (n* = nt-1) (3) Suppose Tit-1 = 3%. What would be the unemployment rate (U ) when it = 4%? (4) Suppose the production function is given by: Yt = Nt = L(1 - up) What happens to the potential output when the markup increases? (5) Suppose there is an increase in oil prices for year : and we model it as an increase in the markup. Draw the changes in the IS-LM-PC model for the following two cases: Case 1. When the expected inflation is anchored (n; = n)? Case 2. When the expected inflation is de-anchored (nf = nt-1)The Phillips Curve is given as; 1= +(m+ z) - au (1) Derive an equation for the natural rate of unemployment from the Phillips Curve First, consider the case where the expected inflation is anchored at the target interest rate . (Notations: It is the target inflation rate, "is the expected inflation, and n is the inflation for year t.) (2) Suppose I = 3%, m = z = 0.1, and a = 1. What would be the unemployment rate (u ) when IT = 4%