Figure 33-4

-Figure 33-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Question

Figure 33-4
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-Figure 33-4 shows four movements of the inflation rate and the unemployment rate.Which panel shows the movement associated with a "supply shock" like those of the 1970s?

Quizplus · Accepted Answer

A supply shock is an unexpected change in the supply of goods and services. This can be caused by a natural disaster, a war, or a change in government policy. In the 1970s, the United States experienced a series of supply shocks, including the oil crisis of 1973 and the grain embargo of 1974. These shocks caused the inflation rate to rise and the unemployment rate to fall. Panel C shows this movement.

Figure 33-4 ​

Figure 33-4