Suppose the government misjudges the natural rate of unemployment to be much lower than it actually is, and thus undertakes expansionary fiscal and monetary policy to try to achieve the lower rate. use the concept of the short-run phillips curve to explain why these policies might at first succeed.

Many potential buyers value high-quality used cars at the full-information market price of € p1 and lemons at € p2. a limited number of potential sellers value high-quality cars at € v1 ≤ p1 and lemons at € v2 ≤ p2. everyone is risk neutral. the share of lemons among all the used cars that might be potentially sold is € θ . suppose that the buyers incur a transaction cost of $200 to purchase a car. this transaction cost is the value of their time to find a car. what is the equilibrium? is it possible that no cars are sold