Let us return to 2019. Assume that the US economy is in its long-run equilibrium. Use the Phillips Curve diagram to illustrate the equilibrium and label it (A). As always, label all axes, short-run and long-run curves, and write the Phillips Curve equation. b) Illustrate the impact of the COVID pandemic on the economy on your diagram and Phillips Curve equation. Label the new equilibrium (B) and comment on how and why macroeconomic variables have changed. c) Next, suppose that supply chain bottlenecks led to inflation that exceeded the pre-pandemic level and that the public have updated their expectations at the same time. To be clear, assume that the actual inflation and inflation expectations changed at the same rate. Label the new equilibrium (C) and comment on how and why macroeconomic variables have changed. Use a new Phillips Curve equation to show your reasoning. d) Suppose that the Fed decided to start contractionary policy. How would this decision affect the economy according to the original Phillips Curve theory? Show your answer both on your diagram and on a new Phillips Curve equation. e) Explain what the sacrifice ratio is and how the Fed would prefer to affect it (increase/reduce/leave the same) when conducting contractionary policy? How could the Fed affect it? Use a new Phillips curve equation to support your answer.