1. What is long-run equilibrium and what condition must be met for it to occur?

2. How does the economy self-correct in the long run after experiencing demand or supply shocks?

3. What do shifts in the long-run aggregate supply curve indicate about the economy?

1. Why is the long-run aggregate supply curve vertical and what does it represent?

2. What happens to aggregate demand, the SRAS curve, and price levels when the Federal Reserve decreases interest rates?

3. What is an inflationary gap and how does the economy self-correct back to long-run equilibrium?

4. How does a negative demand shock create a recessionary gap and what is the self-correction process?

1. Why do aggregate supply shocks have a more severe impact on unemployment than aggregate demand shocks?

2. What were the causes and economic effects of the oil price shocks in 1973 and 1979?

3. What policy tradeoffs do policymakers face when responding to aggregate supply shocks?