given the graph and The current target inflation rate in 8 percent. The natural rate of unemployment is 5 percent and Okun's alpha is 8. The oil producing countries unexpectedly and drastically increase oil prices. As a result the short run aggregate supply function shifts up by 3 percentage points at each and every level of real GDP. what will the inflation rate be? what will the cyclical unemployment be? and If the Fed tries to bring the inflation rate back to the target level, the cyclical unemployment will increase to what?
given the graph and The current target inflation rate in 8 percent. The natural rate of
what will the inflation rate be?
what will the cyclical unemployment be?
and If the Fed tries to bring the inflation rate back to the target level, the cyclical unemployment will increase to what?
The original short-run aggregate supply curve is labeled AS1. The target inflation rate is 8%, so the economy is initially at equilibrium point E1, where the AD curve intersects the AS1 curve. The real GDP is $12,000 billion and the inflation rate is 8%.
When the oil producing countries increase oil prices, the short-run aggregate supply curve shifts up by 3 percentage points to AS2. The new equilibrium point is now at E2, where the AD curve intersects the AS2 curve. The real GDP is now $11,000 billion and the inflation rate is 11%.
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