If expected inflation this year is equal to last year's inflation, and the unemployment rate has been equal to the natural rate of unemployment for the past few years, we know that:Group of answer choicesInflation rate should steadily decreaseInflation rate should steadily increaseInflation rate should remain steadyInflation rate should be zero

Decreasing interest rates tend toGroup of answer choicesIncrease aggregate demandAll options are correctLower inflationCause unemployment

in the 1960’s in the U.S. the unemployment rate was associated withGroup of answer choicesa steady decline in inflation ratea constant state in inflation rateno change in inflation ratea steady increase in inflation rate

When the unemployment rate is above the natural rate of unemployment, the inflation rate typically decreases. When the unemployment rate is below the natural rate of unemployment, the inflation rate typically increases.Group of answer choicesBoth statements are trueThe first statement is true, the second is falseThe first statement is false, the second is trueBoth statements are false

Consider two policy alternatives for disinflation. Policy A is forecasted to last 5 years, and requires the unemployment rate to be kept above NAIRU by 3% throughout the five years. Policy B is forecasted to last 6 years, with unemployment rate above NAIRU by 4% in the first 3 years, and by 2% for the remaining 3 years. Which of the following statements is correct?Group of answer choicesIf Policy B achieves a larger reduction in inflation rate compared to Policy A, it implies Policy B has a smaller sacrifice ratio.If the sacrifice ratio of the economy is 5, Policy B should lead to a disinflation of 3%.None of the other statements is correct.Policy A has higher point-year of excess unemployment than Policy B.

The natural rate of unemployment can be reduced to zero percent.Group of answer choicesTrueFalse