DATA ANALYSISQ1From statistical data, a country’s Phillips curve is found to be u e ? ? 9 ?? ? 0.5 , whereinflation and unemployment are in percentages.a) what is the equilibrium rate of unemployment?b) By how much does a surprising rise of inflation from 2% to 4% reduceunemploymentc) If Okun’s law for this country reads ?Y Y ? 0.03? 0.02?u , by how much doesincome grow (given your result obtained in (b))?THEORYQ2Suppose that the trade union’s insider power is not perfect. By and by, some temporaryoutsiders regain employment and bid wages down. For concreteness, assume that in themedium run unions only manage to keep real wages in the middle, between where theywould want to keep them if they had complete insider power and where wages would go ifunions had no insider power at all.a) Trace the effects of the two oil price explosions under these new assumptions.b) Compare your results with the case of complete insider power and no insider powerat all.Q3Suppose a country with fixed exchange rates reduces government spending G in order tomeet the Maastricht convergence criteria. Use the graphical DAD? SAS model withpersistence (? ? 0.5 ) to find out how this affects incomea) Under adaptive expectationsb) Under rational expectationsc) Under perfect foresight