1.Explain relationships between inflation and unemployment by using the Philips curve.

2.Suppose that people expect inflation to be equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups.

a.a homeowner with a fixed-rate mortgage

b.a union worker with a fixed labor contract

c.a company that has invested some of its endowment in government bond which pay fixed rate of return.