Suppose that an economy has the Phillips curve p=p-1 - O.S(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 S percentage points? d) Using Okun's law, compute the sacrifice ratio e. e) Inflation is running at 10 percent. The Fed wants to reduce it to 5 percent. Give Iwo scenarios that will achieve that goal.

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