. Adjust the accompanying diagram to reflect this development. Set point A at the new combination of the output gap and unexpected inflation. Inflation rate= 0 Unexpected inflation (%) % 10 4 N D ry 4 -6 b. Assuming expected inflation is unchanged, determine the new inflation rate. -10 -5 0 Output gap (%) c. In the wake of the supply shock, the output gap remains unchanged, although output itself may the economy experiences stagflation 5 fall Phillips curve If so, 10

. Adjust the accompanying diagram to reflect this development. Set point A at the new combination of the output gap and unexpected inflation. Inflation rate= 0 Unexpected inflation (%) % 10 4 N D ry 4 -6 b. Assuming expected inflation is unchanged, determine the new inflation rate. -10 -5 0 Output gap (%) c. In the wake of the supply shock, the output gap remains unchanged, although output itself may the economy experiences stagflation 5 fall Phillips curve If so, 10

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 4.10P

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