Suppose it is the late 1970s, and the rate of price inflation

is 12 percent. The Fed chairman, Paul Volker, seeks to

permanently lower the rate of inflation (say, from 12% to 8%).

The short-run and long-run Phillips Curves for the U.S

at this time are illustrated in the figure below. Throughout this

analysis, assume consumers have adaptive expectations.The Federal Reserve decides that it wants to permanently reduce the inflation rate to 8 percent and uses monetary policy to do so. Describe the new short-run Phillips Curve with adaptive expectations.