[a] {2 points} As the capital ratio rises the leverage ratio A. rises B. falls '3. remains unchanged B. may rise, fall or remain unchanged [h] {2 points} Assume that expected ination is based on the following: 11'? = 3111-1, where rrg_1 is the previous period's ination rate and H is a parameter between ll and 1. An increase in ti will cause A. ination in period t to be less responsive to changes in unemployment in period t. B. an increase in the natural rate of unemployment. C. a reduction in the natural rate of unemployment. D. no change in the natural rate of unemployment. {c} {2 points} Based on the wage-setting relation {W3} alone, we know that a reduction in the unemployment rate will cause: A. no change in the real wage B. a reduction in the real wage C. an increase in the real wage D. an upward shift ofthe 'WS curve