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How Are the Effects of a Favorable Supply Shock Shown

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Essay

How are the effects of a favorable supply shock shown in the Phillips curve diagram? If the Fed wants to return unemployment to its natural rate after the shock, what should it do?


Definitions:

Platelets

Small, disc-shaped blood cells important in blood clotting and preventing hemorrhage.

Pulmonary Circuit

The path of blood flow from the heart to the lungs for oxygenation and back to the heart.

Pulmonary Veins

The veins that transfer oxygenated blood from the lungs to the left atrium of the heart.

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