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1. Under what circumstances will a government expansionary fiscal or monetary policy do nothing to raise GDP or lower unemployment? If an expansionary government policy fails to raise GDP or lower unemployment, what would the policy manage to do? 2. If expectations of inflation are adaptive, is there any way to reduce inflation without suffering unemployment higher than the natural rate? What would you advise a central bank that sought to reduce inflation without provoking high unemployment to do? 3. Do you think that inflation expectations in the U.S. Today are static, adaptive, or rational? Why? 4. Suppose that the natural rate of unemployment is 5% for adults, 8% for teenagers, and that teenagers make up 10% of the labor force. What is the natural rate of unemployment? What would be the natural rate of unemployment if a baby boom led to a year in which teenagers made up 20% of the labor force? 5. Suppose that you were advising a government that wants to reduce its inflatio
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