2. the central banks of two nearly identical countries, a and b, desire low inflation and low unemployment. there is a similar short-run tradeoff between unemployment and unexpected inflation in both countries. private agents in both a and b form expectations rationally and understand the incentives that central banks may have to renege on low-inflation policies. initially, the rates of inflation and unemployment are the same in both countries. the central bank of a makes a credible announcement that it will operate according to a low-inflation rule. the central bank of b announces that it plans to follow a low-inflation policy, but retains the right to deviate from this policy at its discretion. a) in which country would you expect the rate of inflation to be lower? b) in which country would you expect the unemployment rate to be lower?
