How Does a Central Bank's Accommodation of an Adverse Supply

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The Answer is If a central bank accommodates an adverse supply shock by increasing the growth rate of the money supply, then inflation is higher in the long run. The increased growth rate of the money supply increases inflation and eventually increases expected inflation. The increase in expected inflation shifts the short-run Phillips curve to the right. If the central bank does nothing, then the short-run Phillips curve shifts back to its original position when the shock ends.

How Does a Central Bank's Accommodation of an Adverse Supply

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How Does a Central Bank's Accommodation of an Adverse Supply

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