Examine the equilibrium below. Potential GDP equals 14. Now suppose that an increase in inflationary expectations raises the inflation rate by 2 percentage points. After this change, what will the inflation rate be, in the short run and in the long run? Assume that the Fed never reacts to GDP gaps. 7 IA 1 AD 10 15 20 25 30 GDP (Y) 9, 2. inflation rate (Tt)

Examine the equilibrium below. Potential GDP equals 14. Now suppose that an increase in inflationary expectations raises the inflation rate by 2 percentage points. After this change, what will the inflation rate be, in the short run and in the long run? Assume that the Fed never reacts to GDP gaps. 7 IA 1 AD 10 15 20 25 30 GDP (Y) 9, 2. inflation rate (Tt)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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