1. When the economy is operating at full employment, why is an increase in aggregate demand not helpful to the economy? When the economy is hit with a supply shock, such as oil prices rising from $25 a barrel to $75 a barrel, why is this double disruptive and harmful to the economy?

2. There is little doubt that computers and the Internet have changed our economy. Information technology (IT) can boost efficiency in nearly everything: Markets are more efficient, IT is global, and IT improves the design, manufacture, and supply chain of products we produce. Use the aggregate demand and supply framework discussed in this chapter to show the impact of IT on the U.S. economy.

3. Why is consumer confidence so important in determining the equilibrium level of output and employment?