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Frictional (or search) unemployment represents people rationally choosing to search for a job.  Thus, no government policy is called for to address it.

The long-term fiscal problems of most industrialized nations are primarily due to: [Select all that apply]

A balanced budget rule (so long as it corrected for cyclical factors) would be a good thing.

Assume adaptive expectations. To end an inflation, a central bank should [Check all that apply]

If the European Central bank cuts long-term interest rates in the Eurozone, then the United States will be better off.

Answer 4 out of the 5 next short answer questions (Worth 12pts each)

Assume purchasing power parity (PPP) holds. If a Big Mac costs $4 in the United States and 10 Mexican pesos trade for $1 US dollar, then a Big Mac in Mexico should cost

Standard measures of unemployment understate true unemployment.

Biden’s stimulus will raise employment in the EU.  (Hint: Does it matter if the Fed has offsetting or accommodating monetary policy?)

The multiplier on exogenous increases in investment is larger if government increases spending automatically in recessions.