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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Suppose a drought destroys farm crops and drives up the price of food. What is the effect on the short-run trade-off between inflation and unemployment?

To determine

Effect of increase in price on short-run trade-off between inflation and unemployment.

Explanation

If the drought reduces the production of food, it increases the price of food. This results in a leftward shift of aggregate supply curve of food and rightward shift of short-run Phillips curve...

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