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2. (4 points each] Suppose that the Phillips curve is given by a:t = a"? + {1.12 31': 'erere it? = Hard Also, suppose that H is initially equal to zero. a. What is the natural rate of unemployment? Suppose that the rate of unemployment is initially equal to the natural rate. In year t, the authorities decide to bring Unemployment rate down to 2% and hold it there forever. h. Determine the rate ofination in years t, t-H, t-I-Z1 t-l-l. c. Do you believe the answer you gave in h? why or why not? Now, suppose that in year H5. .9 increases from I) to l. d. Why might fl increase like this? What is the effect on It\"? Now suppose that H = 1 and ination in year H is zero. In year t, the authorities decide to keep unemployment rate at 2% forever. Now suppose that half the workers have indexed labor contracts (3. = I15]. e. What is the new equation for Phillips curve? f. Compute the rate of ination for year t, t+l , t-I-Z, and H3. g. Suppose now It. = 0.3. Calculate the equation for Phillips curve. Compare it with your answer in part c and explain the effect of indexation on the relation between ination and unemployment