An article in the Wall Street Journal in June 2023 discussed the decision of the Bank of
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An article in the Wall Street Journal in June 2023 discussed the decision of the Bank of England—the United Kingdom’s central bank—to raise the equivalent of the federal funds rate by half a percentage point. The article quoted a manager at a financial firm as saying: “The narrative at the beginning of the year was that we were going into a slowdown, inflation had peaked and the central banks could relax. What we’re seeing now is that . . . [inflation is] accelerating.” Draw a dynamic aggregate demand and aggregate supply graph to show where the Bank of England expected aggregate demand to be and where it was. Briefly explain what is happening in your graph.
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