Question: Please answer the following questions [SD points] 1. Itecall that the medium-run equilibrium is related to the Phillips curve: rrurre = a -rr{-1)= -o:[u u,.}

 Please answer the following questions [SD points] 1. Itecall that the

Please answer the following questions

medium-run equilibrium is related to the Phillips curve: rrurre = a -rr{-1)=-o:[u u,.} where we assume that wage setters expect inflation this year

[SD points] 1. Itecall that the medium-run equilibrium is related to the Phillips curve: rrurre = a -rr{-1)= -o:[u u,.} where we assume that wage setters expect inflation this year to be the same as last year, so that It\" = 111-1)- Answer the following questions: a. Modify the Phillips curve to show the relationship between the change in the Ination rate, It II( 1}, and the output gap, 1" 1"\Substitute u - Un to find the Phillips curve expressed in terms of Y - Y,: n - n(-1) = (2) (- Y) b. Given your answer to part (a), what happens to the change in the inflation rate, I - IT(-1), when Y = Yn? What does this mean? c. Given your answer to part (a), what happens to the change in the inflation rate, I - IT (-1), when Y > Y ? What does this mean? d. Given your answer to part (a), what happens to the change in the inflation rate, It - IT (-1), when Y

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