The central banks of two nearly identical countries, Econland and Banshiland, desire how inflation and low unemployment. There is a similar short run tradeoff between unemployment and unexpected inflation in both countries. Everyone in both countries are both rational, i.e., form their expectation rationally and logically. That is both understand the incentives that central banks may have to renege on low inflation policies. Initially, the rates of inflation and unemployment are the same in both countries. The central bank of Econland makes a credible announcement that it will operate according to a low inflation rule. The central bank of Banshiland announce that it plans to follow a low inflation policy, but retains the right to deviate from this policy at discretion

a.(4 Points) In which country would you expect the rate of inflation to be lower? Explain your answer.

b. (4 Points) In which country would you expect the unemployment rate to be lower? Explain your answer.

c. (5 Points) Given the information above, suppose you are hired as a consultant to set up the central bank of a new country. What would be your characteristics of the central bank structure and your policy suggestion? Explain your answer.