1.2.

a. In the 1970s, the United States had slow growth and high inflation. Which kind of shock better fits these facts?

Negative real shock Positive real shock Negative aggregate demand shock Positive aggregate demand shock 300 • PART 3 • Business Fluctuations

b. Using the same categories, explain the late 1990s, when the United States experienced fast growth and falling inflation.

c. Again using the above four categories, explain the early 2000s, when the United States experienced slow growth and falling inflation.

d. Which shock best explains the 1981-1982 recession, when inflation fell quickly and unemployment rose quickly?