v SE Paragraph IS Styles Edi B. Medium Run Model: Theory vs Reality 1. The FED uses the concept of NAIRU to define full employment and to control inflation. Explain NAIRU and how it is derived from the Inflation- Expectations Phillips Curve. 2. In 2019, unemployment was below the FED's estimate of NAIRU and inflation remained under its target. The FED couldn't explain this; how would you explain it (see the Minsky discussion on inflation)? [Use the price equation to support your answer and discuss all of the factors that influence prices in general: P - (W/A) x (1 + z)] 3. Milton Friedman won a Nobel prize for his theory of Monetarism. Explain this theory. What are the main flaws with the theory? 4. How did Supply-siders, Friedman-Phelps, and Minsky explain the existence of stagflation