Question: Suppose the current inflation rate and the expected inflation rate are both 4 percent. The current unemployment rate and the natural rate of unemployment are

Suppose the current inflation rate and the expected inflation rate are both 4 percent. The current unemployment rate and the natural rate of unemployment are both 5 percent. Use a Phillips curve graph to show the effect of a supply shock. If the Federal Reserve keeps monetary policy unchanged, what will happen eventually to the unemployment rate? Show this change on your Phillips curve graph.

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