Suppose an economy as the Phillips curve given as it = 7-1 - 0.5(u - 5) (a) What are the two important assumptions required to derived this equation? ( 2 points) (b) What is the value of natural rate of unemployment (2 points) (c) Graph the short-run and the long-run relationships between inflation and unemployment. (3 points) (d) Use the graph to illustrate the short-run and long run movements following introduction of an expansionary monetary policy (3 points) (e) How much cyclical unemployment is needed to reduce inflation by 4 percentage points? (2 points) (f) If the Okun's law says 1 percentage point of unemployment implies 3 percentage point of GDP, what is the sacrifice ratio of reducing inflation by 4 percentage points? (3 points)