a) Oil price shocks have an evident impact on the short run aggregate supply curve. With the help of a graph demonstrate how rising oil prices affect the SRAS and explain what other factors can cause this shift. b) Different theories attempted to explain why SRAS curves slope upwards. Identify and explain these theories explaining what they have in common.
a) Oil price shocks have an evident impact on the short run aggregate supply curve. With the help of a graph demonstrate how rising oil prices affect the SRAS and explain what other factors can cause this shift. b) Different theories attempted to explain why SRAS curves slope upwards. Identify and explain these theories explaining what they have in common.
Chapter1: Making Economics Decisions
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Transcribed Image Text:"The oil Price run-up of 2007-08 was caused by strong demand confronting stagnating world production. Although
the causes were different, the consequences for the economy appear to have been very similar to those observed in
earlier episodes, with significant effects on overall consumption spending and purchases of domestic automobiles
in particular. The experience of 2007-08 should thus be added to the list of recessions to which oil prices appear to
have made a material contribution."
Source: Hamilton, J.D., 2009. Causes and Consequences of the Oil Shock of 2007-08 (No. w15002). National
Bureau of Economic Research.
a) Oil price shocks have an evident impact on the short run aggregate supply curve. With the help of a graph
demonstrate how rising oil prices affect the SRAS and explain what other factors can cause this shift.
b) Different theories attempted to explain why SRAS curves slope upwards. Identify and explain these theories
explaining what they have in common.
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