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
Chapter7: Unemployment And Inflation
Section: Chapter Questions
Problem 4.10P
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![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.
so
Unexpected inflation (%)
-4
Ņ
-6
-10
10
N
4
-5
A
Phillips curve
5
10
Output gap (%)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F25f7efff-c578-426c-abfd-59d1d84766c0%2F60479b3a-54e3-4391-92fc-97749dad1b9b%2Fugklo2v_processed.png&w=3840&q=75)
Transcribed Image Text: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.
so
Unexpected inflation (%)
-4
Ņ
-6
-10
10
N
4
-5
A
Phillips curve
5
10
Output gap (%)
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