a central bank has decided to adopt inflation targeting and is now debating whether to target 8 percent inflation or 2 percent inflation. the economy is described by the following phillips curve: where u and are the unemployment rate and the inflation rate measured in percentage points. the social cost of unemployment and inflation is described by the following loss function: a. if the central bank targets 8 percent inflation, what is expected inflation? if the central bank follows through, what is the unemployment rate? what is the loss from inflation and unemployment? explain. b. if the central bank commits to targeting two percent inflation, what is expected inflation? if the central bank follows through, what is the unemployment rate? what is the loss from inflation and unemployment? explain. c. based on your answers to parts (a) and (b), which inflation target would you recommend? d. suppose the central bank chooses to target two percent inflation, and the expected inflation rate is two percent. suddenly, however, the central bank surprises people with 8 percent inflation. what is the unemployment rate in this period of unexpected inflation? what is the loss from inflation and unemployment? explain. e. what if the central bank abandons inflation targeting and creates inflation of 10 percent by printing money. if agents (consumers) even after several periods expect that inflation will continue to be 8 percent, what will be the unemployment rate? are agents being rational? why or why not? if agents have adaptive expectations, what will be the expected inflation rate and the unemployment rate in the next period?