Suppose your economy's Phillips Curve can be described by the expression t=te(uu). (You will be better off using a spreadsheet for this problem) a) If the inflation rate has been stable at 5% for several time periods in the past, calculate the inflation rate for period t assuming that te=t1,=0.50,u=5%,u=5%. b) Suppose that the labor market undergoes a structural change in period t+1 such that the natural rate of unemployment rises to 8% and remains there forever. If the observed rate of unemployment remains 5%, calculate the inflation rate for this economy in periods t+1,t+2 and t+3. Briefly explain your answer. c) Are the changes if any in part(b) owing to movement along the Phillips Curve, a shift of the Phillips curve or combination of both? Explain! d) What should the government or Central bank do in this instance if price stability is valued above all else? e) Now suppose that expectations are formed as te=43t1+41t2 perform the same calculations as in parts (a) and (b) the latter using the same assumption that the natural rate of unemployment climbs to 8% in period t+1. Explain the difference f) What should the government or Central Bank do if stable prices are valued above all else. Compare the magnitude (larger, smaller, no difference) of their action to part (d) Suppose your economy's Phillips Curve can be described by the expression t=te(uu). (You will be better off using a spreadsheet for this problem) a) If the inflation rate has been stable at 5% for several time periods in the past, calculate the inflation rate for period t assuming that te=t1,=0.50,u=5%,u=5%. b) Suppose that the labor market undergoes a structural change in period t+1 such that the natural rate of unemployment rises to 8% and remains there forever. If the observed rate of unemployment remains 5%, calculate the inflation rate for this economy in periods t+1,t+2 and t+3. Briefly explain your answer. c) Are the changes if any in part(b) owing to movement along the Phillips Curve, a shift of the Phillips curve or combination of both? Explain! d) What should the government or Central bank do in this instance if price stability is valued above all else? e) Now suppose that expectations are formed as te=43t1+41t2 perform the same calculations as in parts (a) and (b) the latter using the same assumption that the natural rate of unemployment climbs to 8% in period t+1. Explain the difference f) What should the government or Central Bank do if stable prices are valued above all else. Compare the magnitude (larger, smaller, no difference) of their action to part (d)