1. In the 1990s, the U.S. experienced a period of high output growth and low inflation, contrary

to the "Philips Curve" view of the economy in which output and inflation move in the same

direction. In a couple of sentences, give a likely explanation. In an AS/AD framework, how

might this have occurred? (10 points)

2.Aggregate supply (11 points). This question focuses on the slope of the aggregate supply

curve.

a. Why does the short-run aggregate supply (SRAS) curve have a positive slope? (6 points)

b. Why is the long-run aggregate supply (LRAS) curve vertical? Explain why it differs from the SRAS curve. (5 points)

3.