Question 13 Disruption to the supply of natural gas to Atlantis has caused a surge in energy prices. While Atlantis has had a period of inflation around 2% for several years, the current rate of inflation is 6%. (a) What type of shock has affected Atlantis and how has it fueled inflation? [5 marks] (b) Explain what is meant by the natural rate of unemployment and explain why the long-run Phillips curve is vertical at that rate. Why is inflation constant in the long- run equilibrium? [10 marks] (c) Analyze the effect of the shock on Atlantis using short- and long-run Phillips curves. Explain how the Central Bank's willingness to accommodate the shock affects inflation and unemployment in Atlantis. [10 marks] (d) Explain why the credibility of monetary policy is important. [5 marks]