The paper investigates asymmetry in the slope of the aggregate supply curve in the face of aggregate demand shocks using annual data for ten countries of the Middle East. The evidence is constrasted to a sample of developing countries and a sample f more developed countries. The empirical evidence is consisent with a steeper supply curve in the face of positive demand shocks compared to negative shocks for many countries. For these countries, demand fluctuations are consisten with a net positive contribution to trend price inflatin and a net negative contribution to tend output growth. These results challenge the long-term neutrality of demand fluctuations. University of Wisconsin-Mulwaukee, Milwaukee, Wisconsin, U.S.A.