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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

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BuyFindarrow_forward

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
Chapter 22, Problem 4QR
Textbook Problem
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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 of Solution

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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