2. Explain the experience of the US between 1996 and 2000 when the economy was at greater than full employment with high GDP growth while maintaining low levels of inflation. What allowed this so-called "New Economy" to occur, and what brought it to an end in 2001?
During that time the US experienced a great economic growth, thus GDP growth and over employment was acceptable because the economy grew even faster than the over employment did. Therefore, inflation remained low. However, in 2001 there was probably a supply shock, or cost push inflation, which made inflation a huge problem. The GDP was not growing that fast anymore to keep inflation down.