Question 5 (4 + 4 + 4 +4 +4 = 20 p.) Choose the missing words in the following sentences. a) In a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade surplus / balanced trade / a trade deficit and positive / zero / negative net capital outflow. b) In the event that an unfavorable supply shock moves the economy away from the natural rate of output, the Central bank faces a dilemma: monetary policy can either return output to the natural rate but with a higher / lower price level, or allow the price level to return to its original level but with a higher / lower level of output in the short run. c) If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is 0.10, then the current unemployment rate is above / at / below the equilibrium rate. In the next period it will move toward / stay at / move away from the equilibrium rate. d) Starting from the natural level of output, an unexpected monetary contraction will cause output and the price level to increase / decrease in the short run. In the long run, the expected price level will increase / decrease, causing the level of output to return to the natural level. e) A debt-financed tax cut will increase / not change / decrease current consumption in the traditional view and increase / not change / decrease current consumption in the Ricardian equivalence view.