Question: a. If long-run aggregate supply shocks do largely explain business fluctuation, while the aggregate demand curve mostly stays fixed, then should prices be higher than usual or lower than usual during a recession?
b. The following chart portrays historical U.S. data on the relationship between the price level and real GDP. If you take a look at the big swings in the 1970s and early 1980s, especially during recessions, do the data roughly suggest that long-run aggregate supply curve shocks or aggregate demand shocks were the primary disturbance?
