The Reserve Bank of New Zealand (the central bank) signed an agreement with the New Zealand government in which the Bank agreed to maintain inflation inside a low target range. Failure to achieve the...

The Reserve Bank of New Zealand (the central bank) signed an agreement with the New Zealand government in which the Bank agreed to maintain inflation inside a low target range. Failure to achieve the target would result in the governor of the Bank losing his job.

1 Explain how this arrangement might have influenced New Zealand’s short-run Phillips curve.

2 Explain how this arrangement might have influenced New Zealand’s long-run Phillips curve.