(a) The current inflation rate (in year 0) in an economy is 18% and the current unemployment rate is 6%. The natural rate of unemployment is 6%, the...

2. (a) The current inflation rate (in year 0) in an economy is 18% and the currentunemployment rate is 6%. The natural rate of unemployment is 6%, thenormal (GDP) growth rate is 3%. The coefficients for the Phillips Curveand the Okun’s Law are   1 and   0.5 respectively. Suppose thecentral bank wants to begin a process of disinflation in year 1 such thatinflation is reduced every year by 3% until it reaches the desired level of3%. Given this desired path of inflation, calculate the paths ofunemployment, output growth rate and nominal money growth for years 1through 7. Show and explain all your calculations and in particular, explainwhy does each variable change as they do