1. Why is the long-run aggregate supply curve vertical?
2. How does strong economic growth in China affect aggregate demand in the United States?
3. Consider two economies, both in recession. In the first economy, all workers have longterm contracts that guarantee high wages for the next five years. In the second economy, all workers have annual contracts that are indexed to changes in the price level (that is, their wages change immediately if there is inflation or deflation). Which economy will return to full-employment output first? Explain your response.