Use your answer to the previous question to help you diagnose what kinds of shocks have hit
Question:
Use your answer to the previous question to help you diagnose what kinds of shocks have hit the economy. If the real interest rate changes, what type of shock can you conclude must have occurred? Alternatively, if the output gap has shifted without much movement in the real interest rate, what does this tell you must have happened? Or, what if you find that inflation has risen despite a weak economy, or inflation has fallen despite a strong economy?
Data from in previous question
Consider the three types of economic shocks: financial shocks, spending shocks, and supply shocks. Discuss how each one affects the real interest rate, output gap, and the inflation rate.
Step by Step Answer:
Principles Of Economics
ISBN: 9781319330156,9781319419769
2nd Edition
Authors: Betsey Stevenson, Justin Wolfers