1. Explain the two theories of aggregate supply. On what market imperfection does each theory rely? What do the theories have in common?

  2. How is the Phillips curve related to aggregate supply?

  3. Why might inflation be inertial?

  4. Explain the differences between demand-pull inflation and cost-push inflation.

  5. Under what circumstances might it be possible to reduce inflation without causing a recession?

  6. Explain two ways in which a recession might raise the natural rate of unemployment.