(Inflation and Unemployment in the Short-Run)Suppose that an economy has the Phillips curve p = p−1 – 0.5(u − 0.06). A. What is the natural rate of unemployment? B. Graph the short-run and long-run...

(Inflation and Unemployment in the Short-Run) Suppose that an economy has the Phillips curve p = p−1 – 0.5(u − 0.06). A. What is the natural rate of unemployment? B. Graph the short-run and long-run relationships between inflation and unemployment. C. How much cyclical unemployment is necessary to reduce inflation by 5 percentage points? Using Okun’s law, compute the sacrifice ratio. D. Inflation is running at 10 percent. The Fed wants to reduce it to 5 percent. Give two scenarios that will achieve that goal.