For each question, identify the statement as True, False, or Uncertain, and explain your reasoning (in total of not more than one hundred words). The maximum marks for each question will be given for a full and correct explanation. You may use written, diagrammatic, and mathematical arguments as appropriate.

1. When the interest rate on government debt is smaller than the growth rate of the economy's output, the debt-to-output ratio can be stabilised only if the government runs a deficit.
2. Assume both labour productivity and the mark-up are constant. Comparing an economy with trade unions to another economy without trade unions, the activities of trade unions are counterproductive because they generate inflationary pressure and in the new equilibrium, employment is lower.

Thank you!