1. Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock. A. Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run. B. Show the adjustment process of the economy from the short-run to the long-run. C. What is the effect on unemployment in short-run and long-run? D. Can policymakers do something to accommodate this shock? Would the outcome be different in this case?
1. Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock. A. Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run. B. Show the adjustment process of the economy from the short-run to the long-run. C. What is the effect on unemployment in short-run and long-run? D. Can policymakers do something to accommodate this shock? Would the outcome be different in this case?
Chapter6: How Statisticians Measure Inflation
Section: Chapter Questions
Problem 3TY
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Analyzing Business Cycles:
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1. Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock.
A. Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run.
B. Show the adjustment process of the economy from the short-run to the long-run.
C. What is the effect on
D. Can policymakers do something to accommodate this shock? Would the outcome be different in this case?
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