Exercise S. This exercise consists of a certain number of questions. Attempt all of them. Justify your answers using concepts developed in the lecture notes a. What is a Phillips curve? What is the natural rate of unemployment? b. Does the Canadian data of chapter 16 of the lecture notes justify the assertion that the government can use the Phillips curve to reduce unemployment by creating more inflation? Suppose that the interest rate in the US decreases from 3% to 0.5% while the interest rate in the European Union remains unchanged at 5%. Assume that the exchange rate between the US dollar and the Euro, the money of the European Union, is flexible. Answer the following questions. Justify your answer using the demand and supply model c. What happens to net capital inflows into the US and net capital outflows out of the US? d. What should happen to the equilibrium exchange rate of the US dollar in terms of the Euro? e. What happens to US exports, imports, and trade account balance? f. Use your answers to questions c)-e) of this exercise to justify your answer to the following question: " A previous president of the United States of America, US, wanted to lower the exchange rate of the US dollar in terms of the Euro with the help of the president of the central bank of the US. The latter raised the US interest rate three times during the term of office of the previous US president." Given that the US president appoints the president of the US central bank, should the latter have resigned, or should she have been promoted? 1 A Y D C # B U > G