Suppose the Phillips curve is given by
pie t = piet-1- .5 (ut - u^n)
(a) If a government wants to reduce in?ation by 3 percent for year t, what is the increase/decrease in cyclical unemployment in year t?
(b) According to the Okun?s law, how much of a year?s real GDP would increase/decrease by the disin?ationary policy?
(c) According to the result in part (a) and (b), what is the sacri?ce ratio?