Q. 1. Under Illustrate what circumstances will a government expansionary fiscal or monetary policy do nothing to raise GDP or lower unemployment? If an expansionary government policy fails to raise GDP or lower unemployment, illustrate what would policy manage to do?

2. If expectations of inflation are adaptive, is re any way to reduce inflation without suffering unemployment higher than natural rate? Illustrate what would you advise a central bank that sought to reduce inflation without provoking high unemployment to do?

3. Do you think that inflation expectations in U.S. Today are static, adaptive, or rational? Why?

4. Assume that natural rate of unemployment is 5% for adults, 8% for teenagers and those teenagers make up 10% of labour force. Illustrate what is natural rate of unemployment? Illustrate what would be natural rate of unemployment if a baby boom led to a year in which teenagers made up 20% of labour force?

5. Assume that you were advising a government that wants to reduce its inflation