Problem
a) If gm,t = 6% initially, what is the medium run value of (inflation)?
b) Starting from the initial medium run values for ut-1 and if the Fed lowers gm,t to 4%, find the value after one period (short run) for unemployment.
c) Starting from the initial medium run values for ut-1 and if the Fed lowers gm,t to 4%, find the value after one period (short run) for inflation.