16 Describe the events that could create this sequence. Has the economy experienced demand-pull inflation, cost-push inflation, expected inflation, or none of these?

An economy has an unemployment rate of 4 per cent and an inflation rate of 5 per cent a year at point A in the figure. Some events occur that move the economy in a clockwise loop from A to B to D to C and back to A.

Transcribed Image Text:

20 20 15 Inflation rate (per cent per year) 10 10 5 B D A C 0 2 4 6 8 Unemployment rate (percentage of workforce)