340
1 point: Vertical axis labeled “Inflation rate”
1 point: Horizontal axis labeled “Unemployment rate”
1 point: Downward-
1 point: Vertical curve labeled “LRPC”
1 point: SRPC0 crosses horizontal axis where it crosses LRPC
1 point: NAIRU is labeled where SRPC0 crosses LRPC and horizontal axis
1 point: New SRPC is labeled, for example as “SRPC',” and shown above the original SRPC0
1 point: When the unemployment rate moves below the NAIRU, it creates inflation and moves the economy to a point such as A. This leads to positive inflationary expectations, which shift the SRPC up as shown by SRPC'.
Consider the accompanying figure.