slowdown in potential output, rather than a negative demand shock, that resulted in the slower growth in actual output. Show the effect of the monetary policy you proposed in part (b) on short-run output in the "true" IS-MP diagram. (d) Following part (c), show the effect of this monetary policy on inflation in a graph of the Phillips curve. Explain what happen. (e) How will policymakers from parts (a) and (b) know they have made a mistake? Question 5. Use the equations given below to answer questions: Y = Ct + It + Gt + EXt - IMt Ct = de + sht, 0