4.1. Use the WS (wage-setting) and PS (price-setting) relations to examine the effects of the following events on the natural rate of unemployment and on the real wage. 4.1.1. There is a technological innovation that makes workers more productive. (5)

4.2.2. Less stringent anti-trust enforcement (leading to less competitive markets). (5)

4.3. The impossible trinity suggests that a central bank can prevent a balance-of-payments crisis by limiting the cross-border flows of capital. True or false? Explain your answer (4)

4.4. Define the AD curve and show graphically how the AD curve is derived. (6)