The Fed Model -- End of Chapter Problem For each of the following, diagnose which type of economic shock has hit the economy a. On your drive to campus you hear a radio report describing how the recession appears to have ended and while output remains less than potential, the output gap has risen from 7% to -5%. The host is interviewing an economist who states, "The change in GDP isn't terribly surprising, as the Federal Reserve continues to cut the real interest rate." This scenario illustrates a shock b. The latest inflation report inditates an unexpected uptick in inflation, even though output remains below potential. This scenario illustrates a shock c. The real interest rate has been stable over the past few quarters, yet output has grown rapidly, leading to a more positive output gap. This scenario illustrates a shock. Question of 17 The Fed Model -- End of Chapter Problem For each of the following, diagnose which type of economic shock has hit the economy a. On your drive to campus you hear a radio report describing how the recension appears to have ended and while output remains less than potential, the output gap has risen from 7% to -5%. The host is interviewing an economist who state, "The change in GDP isn't terribly surprising, as the Federal Reserve continues to cut the real interest rate." This scenario illustrates a shock supply pending b. The latest financial indicates an unexpected uptick in inflation, even though output remains below potential. This scenario illustrates a shock financial supply c. The real interest ra spending le over the past few quarters, yet output has grown rapidly, leading to a more positive output gap. This constrates a shock financial spending supply