The future health of the economy

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B2. Suppose that consumers become pessimistic about the future health of the economy, and so cut back on their consumption spending. What will happen to aggregate demand and to output? What might the government have to do to keep output stable?

B3. Why and in what way are fiscal policy lags different from monetary policy lags?

B4. Explain the connection between the vertical long-run aggregate supply curve and the vertical long-run Phillips curve.

B5. Suppose that the economy is at an inflation rate such that unemployment is above the natural rate. How does the economy return to the natural rate of unemployment if this lower inflation rate persists?

Reference no: EM13810678

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