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Question: For each of the following, diagnose which type of economic shock has hit the economy (Financial shock - Spending shock - Supply shock)

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."

b/ The latest inflation report indicates an unexpected uptick in inflation, even though output remains below potential output.

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