A temporary adverse supply shock

FE²

FE¹

LM¹

LM²

 1. Adverse
supply shock

2. Price 
increases

New equilibrium

Initial equilibrium

IS

Real interest, r

Y₁

Y₂

Output, Y

Effects of A Temporary Adverse Supply Shock

A = Intersect(xAxis, yAxis)
B = Point(xAxis)
a = Segment(A, B)
C = Point(yAxis)
b = Segment(A, C)
D = (4.5, 0)
E = (4.5, 7)
c = Segment(D, E)
f = If(2 < x < 7, 0.3 * x^(1.5))
g = If(2 < x < 7, 0.3 * 4.5^(2.3) * x^(-0.8))
F = Intersect(f, g, (4.500000000000003, 2.86378246380552))
G = Point(f)
H = Point(g)
I = (3, 0)
J = (3, 7)
d = Segment(J, I)
e = true
h = If(0.5 < x < 5.5, 0.3 * (x + 1.5)^(1.5) + 0.3 * 4.5^(2.3) * 3^(-0.8) - 0.3 * 4.5^(1.5))
K = Intersect(g, h, (3, 3.9610746999565523))
L = Point(h)
M = Point(d)
N = Point(c)
P = Point(f)
Q = Point(h)
u = Vector(N, M)
v = Vector(P, Q)
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