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The rise in average mark-ups globally since 1980 would, on this calibration, be expected to 1  raise the trade-off parameter in the Golden Rule ( ) from around 0.1 to 0.4. This is a reasonably significant 𝜖  shift in the terms of trade between inflation and output variability. Chart 19 seeks to brings all of these points together graphically; it is an empirically-calibrated version of Figure 1. Point A is the starting equilibrium, before any rise in the (trend and variability) of mark-up shocks, with the policy possibility curve tangent to the policymaker’s loss function. A rise in the (trend and variability) of mark-ups then has three distinct effects. First, an increase in mark-up volatility causes an outward shift in the policy possibility frontier (A to B), calibrated here to be equivalent in scale to the outward shift from the counterfactual simulations. Second, there is the clockwise rotation of the Phillips curve, and hence in the policy possibility frontier (B to C), calibrated to be equivalent to the mark-up rise among firms globally since 1980. And third, there is the shift in the relative weight placed on output stabilisation by the policymaker, calibrated in line with the mark-up shift (C to D). The net effect of increased market power is a significant rise in inflation variability but relatively less change in output variability. Chart 20 uses the same calibration, but looks at the relationship between inflation and interest rate variability.