The following table shows the inflation rate and output level for four consecutive periods in a given economy. In period 1, the economy is at its long-run equilibrium (i.e., the inflation rate equals its target and output equals potential output). In period 2 there is a temporary supply shock (e.g., an increase in energy prices).

 

a) Based on the table, determine which type of response was implemented by policy makers (e.g., nothing versus stabilizing inflation or economic activity).

b) Show your argument using a graph (draw the MP curve and the AD/AS diagram consistent with the table data).

 

Alpha Geek

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Status NEW Posted 23 Apr 2017 05:04 PM My Price 3.00

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