Suppose the economy is initially in macroeconomic equilibrium, with an output gap of 0%, unexpected inflation of 0%, and inflation expectations of 2%. A war in the Middle East disrupts oil supplies. a. Adjust the accompanying diagram to reflect this development. Set point A at the new combination of the output gap and unexpected inflation. 6

Suppose the economy is initially in macroeconomic equilibrium, with an output gap of 0%, unexpected inflation of 0%, and inflation expectations of 2%. A war in the Middle East disrupts oil supplies. a. Adjust the accompanying diagram to reflect this development. Set point A at the new combination of the output gap and unexpected inflation. 6

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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