1.

a)When inflation has been persistent, high unemployment rates will likely be associated with:

Select one:

a. high but stable rates of inflation.

b. reductions in the inflation rate.

c. low but stable rates of inflation.

d. high natural rates of unemployment.

e. low natural rates of unemployment.

b)Which of the following events will cause an increase in the size of the sacrifice ratio?

Select one:

a. decrease in

b. decrease in

c. increase in

d. increase in

e. None of the above.

c) Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run:

Select one:

a. economic growth will be higher in A than in B.

b. output per capita will be the same in the two countries.

c. output per capita will be greater in A than in B.

d. output per capita will be greater in B than in A.

e. more information is needed to answer this question.

d) For this question, assume that the natural rate of unemployment is 6.5%. Suppose the Australian inflation rate has been 10% for many years, and the policymakers want next year's inflation rate to be 5%. According to the Phillips curve for Australia, the unemployment rate next year will have to be:

Select one:

a. 13%.

b. 7%.

c. 25%.

d. 20%.

e. 0%.