1. In the short run, the percentage increase in output tends to correspond to a smaller percentage decrease in the unemployment rate due to "slippages." Explain the three slippages between changes in output and changes in the unemployment rate.
2. George Jetson has recently been promoted to inventory control manager at Spacely Sprockets, and he must decide on the optimal level of sprockets to keep in inventory. How should Jetson decide on the optimal level of inventory? How would a change in interest rates affect the optimal level of inventory? What costs and benefits will Spacely Sprockets experience by holding inventory?