Use the following information to answer the next two questions. Consider the Phillips curve πt=π-ε(Ut-U*) with =1.5, u*=0.06, and n=0.05. Suppose that uo-u*. Suppose the current government pressures the RBA to bring the economy to an unemployment rate of 0.04 for the next period. With adaptive expectations, what inflation rate should the RBA target?
