1.9. Following the productivity slowdown discussed in question 8, the U.S. economy experienced a relatively quick transition to the electronic age of computers and the Internet, and many of the Business Fluctuations: Aggregate Demand and Supply • CHAPTER 1 3 • 303 outward effects of the 1970s energy crises faded as a result.

a. Use the dynamic aggregate demand and sup ply model to show the effects of widespread computer and Internet usage on the econ omy if spending growth remains unchanged.

b. Suppose that velocity increases due to greater consumer confidence because of your findings in part

a. First, does greater consumer confidence make sense? Why?

c. Second, how will this affect inflation and GDP growth in the long run?