3. For this question, assume that expected inflation this year is equal to past year's inflation. Also assume that the unemployment rate has been equal to the natural rate of unemployment for some time. Given this information, we know that:

a. the rate of inflation should be zero.

b. the rate of inflation should neither increase nor decrease.

c. the rate of inflation should steadily increase.

d. the rate of inflation should steadily decrease.

e. the natural rate of unemployment should steadily decrease.

4. Which of the following will NOT cause an increase in the natural rate of unemployment?

a. an increase in the markup, μ

b. an increase in unemployment benefits (included in z)

c. an increase in the expected inflation rate

d. a reduction in the response of wages to unemployment, α

e. none of the above

Attachment:- 326693_1_quiz-3-more.docx