1. Explain how the aggregate supply and Phillips curves are related to each other. Can any information be derived from one that cannot be derived from the other?
2. How do short- and long-term Phillips curves differ? (Hint: In the long run, we return to a classical world.)
3. This chapter has discussed a number of different models that can be used to justify the existence of sticky wages, and hence the ability of aggregate demand to affect output. What are they? What are their similarities and differences? Which of these models do you find the
most plausible?
4. a. What is stagflation?
b. Describe a situation that could produce it. Could the situation you've described be avoided? Should it be avoided?
5. Explain how the ability of inflation expectations to shift the Phillips curve helps the economy to adjust, automatically, to aggregate supply and demand shocks.