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Initially, an economy is at its long-run equilibrium. But then the economy is hit by a shock, causing its price level to go up and
Initially, an economy is at its long-run equilibrium. But then the economy is hit by a shock, causing its price level to go up and its unemployment to fall below its natural rate. Explain:
(i) what kind of shock hits the economy, and
(ii) what kind of inflation the economy is experiencing.
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