Answer Happy

A worldwide drought has reduced food production. Inflation has increased; unemployment has risen above the natural rate. Americans are frustrated with their government. Your roommate says, "This economic mess has got to be somebody's fault-probably the president or Congress. A year ago, both inflation and unemployment were lower. We need to vote in some policymakers that know how to get rid of this inflation and unemployment."
A. B. Whose fault is the stagflation that is present in the economy? Are the current inflation and unemployment choices facing the economy better or worse than before the supply shock? What has happened to the short-run Phillips curve? If policymakers increase aggregate demand in response to the supply shock, in what direction will the economy move along the new short-run Phillips curve? What will happen to inflation and unemployment? C. 34
D. If policymakers decrease aggregate demand in response to the supply shock, in what direction will the economy move along the new short-run Phillips curve? What will happen to inflation and unemployment? E. Is there a policy that can immediately reduce both inflation and unemployment? Explain. 35