The Phillips curve in Timbuklow takes the form of =4-0.5(u-5), where is the actual inflation rate and u is the unemployment rate. The Phillips curve in Timbukhigh takes the form of =8-0.5(u-5). The current unemployment rate in both countries is 9 percent.

a) Explain the similarities in the Phillips curves in Timbukhigh and in Timbuklow.

b) Explain the differences in the Phillips curves in Timbukhigh and in Timbuklow.

c) In which country will policymakers face a bigger tradeoff if they try to reduce unemployment in the short run? Explain.

d) Describe 3 factors that explain the change in the natural rate of unemployment over time.