5. We will now use the calculator to study the gap changes in the 1980s associated with the Federal Reserve's response to inflation under then Chair Paul Volker.

showing your calculated results for a single inflation shock of size 1.75 at t - 3 years. We will now use the calculator to study the gap changes in the 1980s associated with the Federal Reserve's response to inflation under then Chair Paul Volker. 25 y - calc. 20 It - calc. r - calc. 15 u - calc. y - obs. 10 u - obs. GAPS (percent) 5 0 -5 -10 1978 1980 1982 1984 1986 1988 Source: FRED / BEA TIME (year) successive lowering of target inflation