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Q1) If you wanted to draw the long-run aggregate supply curve accurately, taking into account the idea that very high rates of inflation are likely to reduce real growth, how would you draw the long-run aggregate supply curve? A) Would you draw a perfectly vertical curve, a curve with a positive slope, or a curve with a negative slope?

Q2) In the following cases, will real growth rise, fall, or remain unchanged according to the New Keynesian model? Expected inflation = 5%, Actual inflation = 7% Expected inflation = 3%, Actual inflation = 1% Expected inflation = 6%, Actual inflation = 6% Expected inflation = 7%, Actual inflation = 10% Expected inflation = -1%, Actual inflation = 0%