Check Your Understanding

  1. Question

    Explain why a decrease in aggregate demand causes a movement along the short-run Phillips curve.

  2. Question

    Why is there no long-run trade-off between unemployment and inflation?

  3. Question

    Why is disinflation so costly for an economy? Are there ways to reduce these costs?

  4. Question

    Why won’t anyone lend money at a negative nominal rate of interest? How can this pose problems for monetary policy?