Suppose that last year the unemployment rate was 5 percent and ...

[pragya sharda]

Suppose that last year the unemployment rate was 5 percent and the inflation rate was 2.5 percent. If the natural rate of unemployment is 5 percent, how do you expect inflation to change?
 
  What will be an ideal response?

Question 2

Open market operations refer to the buying and selling of ________ by the ________ to control the money supply.
 
  A) Treasury securities; Federal Reserve B) stocks and bonds; Treasury Department
  C) stocks and bonds; Federal Reserve D) Treasury securities; Treasury Department

[dominiqueenicolee]

Answer to Question 1

Inflation is stable when the unemployment rate is equal to the natural rate of unemployment. Since last year's unemployment rate was equal to the natural rate of unemployment, the inflation rate should not change.

Answer to Question 2

A

[pragya sharda]

Excellent

[elyse44]

Gracias!