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Illustrate and explain the effect that a permanent supply shock will have to output, inflation, real interest and unemployment. Assume the shock is expected to
Illustrate and explain the effect that a permanent supply shock will have to output, inflation, real interest and unemployment. Assume the shock is expected to result in permanently higher price and that the level of expected inflation is anchored to the central bank's target value and does not change (t+1e=). How would your answer contrast to a more temporary change from the shock, discuss. (9) Illustrate and explain the effect that a permanent supply shock will have to output, inflation, real interest and unemployment. Assume the shock is expected to result in permanently higher price and that the level of expected inflation is anchored to the central bank's target value and does not change (t+1e=). How would your answer contrast to a more temporary change from the shock, discuss. (9)
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