Questions:
1. Explain how the short-run Phillips curve, the long-run Phillips curve, the short-run aggregate supply curve, the long-run aggregate supply curve, and the natural rate hypothesis are all related. How do active and passive views of these concepts differ?
2. How does monetary policy affect aggregate demand in the short run? How does monetary policy affect aggregate demand in the long run?
3. Explain why the Fed can attempt to target either changes in the money supply or changes in interest rates, but not both.
4. Explain how an active policy differs from a passive policy.