1.Over the next year, inflation is expected to be about 2%. Suppose that inflation actually turns out to be 1%over the next year (lower than expected). Given this would you rather be a lender or a borrower? Explain.

2.Define and give an example of frictional unemployment, structural unemployment, and cyclical unemployment. Which of these types of unemployment are natural and unavoidable? What is a policy a government can enact to reduce the natural rate of unemployment?