thank you so much!

12) (~ 24 pts) The Volcker Disinflation: Assume that in year 1, inflation = expected inflation = 15% and the bargaining gap = 0%. Also assume that for all years, expected inflation = inflation in the previous year. a) Suppose in year 2, The Fed, (the US central bank) changes the real policy interest rate to make inflation equal 5% in year 2 and then in year 3 changes the real policy interest rate to stabilize inflation at 5%. Copy and complete the following table in your bluebook (You have enough information to complete the table!): Year Expected inflation Bargaining gap Inflation 15% 0% 10% 2 3 b) Given your answer from part a), how does the Fed change real interest rates from year 1 to year 2 and from year 2 to year 3? (decrease? Increase?)