Consider an economy that is characterised by the following Phillips curve: u = ū-0 (¹-²), where u is unemployment, ū is the natural rate of unemployment, is inflation, ² is the expected inflation and > 0 is a parameter. Suppose that the loss function of the central bank is given by: L(u, п) = λu+л². where > 0 is a parameter. Agents are assumed to be rational. a. Compute the equilibrium inflation and unemployment rates if the central bank commits to π = 0 and is believed by the public. (2 points) b. Compute the equilibrium inflation and unemployment rates if the central bank acts under discretion. (3 points) c. Compute the central bank's loss under commitment to zero inflation and under discretion. Interpret your results. How does the parameter λ affect the comparison of outcomes under the two regimes? (5 points)