Question: Using the expression for the short-run aggregate supply curve obtained in the previous problem, r = 0 (U - Un) + r p = pe

Using the expression for the short-run aggregate supply curve obtained in the previous problem, r = 0

(U - Un) + r p = pe -0.6 *

U - Un = -0.75 * (Y - YP)

draw the new short-run aggregate supply curve in the same graph if there is a price shock such that . Calculate inflation when output is

$8, $10, and $12 trillion respectively.

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