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5. We will now use the calculator to stud}r the gap changes in the 1980s associated with the Federal Reserve's response to ination under then

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5. We will now use the calculator to stud}r the gap changes in the 1980s associated with the Federal Reserve's response to ination under then Chair Paul Volker. 25 20 _|. _|. D U1 GAPS {percent} U'I 19 1 9?3 1 930 1932 1 984 1933 1933 Source: FRED 35.24 TIM E {year} I used an ination shoclr based on a change in the ination target of the Fed. In the graph \"calc\" means calculated and \"obs.\" means observed. My approach to this analysis is as follows: (a) Add a column to calculate the unemployment gap from the output gap using Okun's law. This is useful because data for the unemployment gap is more com mon than is data for the output gap. (b) Get annual data from FRED to calculate the output and unemployment gaps. This will he just like your Okun's law data retrieval, but with annual data instead of quarterly data. (c) I started a shock sequence at model time t = [l and aligned that with actual time t = 1979. The model ooefcients were set to {3 = 1, or = 1, and Q, = [1.25. Your submission for this question should be a screenshot of your calculator showing your calculated version of the graph above together with a brief

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