1. Why does the correlation between inflation and unemployment depend upon the source of macroeconomic fluctuations?

2. Does the Phillips curve offer macroeconomic policymakers a menu of choices between the rate of unemployment and inflation? Why or why not?

3. What is meant by the statement that the existence of the economy's self-correcting mechanism ensures that in the long run, the Phillips curve is vertical?

4. How does the expectation of future inflation and expectations-related shifts in the aggregate supply curve affect the Phillips curve?

5. Consider the following statement: "The increase in prices that resulted when we restored full employment was a small price to pay for the increased output. Why not try moving even farther along the aggregate supply curve? If we further stimulate the economy to lower unemployment we can increase output to, say, $10,700 billion and prices will only rise to 106. We can thus have a permanent increase in our output of $400 billion every year in return for a one-time increase in prices of just under 3 percent. That's a pretty favorable trade-off."

What is wrong with the reasoning of this argument?