4. (Computational analysis) Consider the Phillips curve t=te(utu) with =1.2,u=0.05, and te=0.08. Suppose that u0=u. (a) Suppose that policy makers wish to lower unemployment. They are willing increase inflation to 10% for year t, what unemployment rate will result from the inflation target? (b) Suppose that the public has fixed expectations and that policy makers continue to target =10%. Determine the implied rate of unemployment in years t+1,t+2, and t+3. (c) Explain why this expectations formula is unlikely to remain true. (d) Suppose that in year t+4 public switches to employ simple adaptive expectations. Policy makers maintain the new lower unemployment rate. What inflation targets do they need to set for years t+4,t+5, and t+6 ? (e) Is it possible for the policy makers to sustain low unemployment along with a 10% inflation rate? 4. (Computational analysis) Consider the Phillips curve t=te(utu) with =1.2,u=0.05, and te=0.08. Suppose that u0=u. (a) Suppose that policy makers wish to lower unemployment. They are willing increase inflation to 10% for year t, what unemployment rate will result from the inflation target? (b) Suppose that the public has fixed expectations and that policy makers continue to target =10%. Determine the implied rate of unemployment in years t+1,t+2, and t+3. (c) Explain why this expectations formula is unlikely to remain true. (d) Suppose that in year t+4 public switches to employ simple adaptive expectations. Policy makers maintain the new lower unemployment rate. What inflation targets do they need to set for years t+4,t+5, and t+6 ? (e) Is it possible for the policy makers to sustain low unemployment along with a 10% inflation rate