Please answer Q7.
6. Consider the Phillips curve Tt - Tt-1 = 20% - 4ut. Suppose that the inflation rate at t - 1 (that is, Tt-1) was 6%, and that the unemployment rate at time t (that is, ut) is equal to 3%. Calculate the inflation rate at time t.
7. The Phillips curve is the same as in question 6. Suppose that the monetary authority wants to keep the unemployment rate at time t +1 equal to 3%. Using your answer to question 6, calculate the inflation rate at time t+1.