Question 7. Suppose there is an exogenous increase in the price of oil in an economy.a. Use the aggregate demand and supply model to illustrate and examine the impact ofthe oil-price increase on output, employment and the price level in both the short runand the long run.b. If the Bank of Canada cares about keeping output and employment at their natural-ratelevels, what is the policy response of the Bank of Canada? What is the impact of policyresponse on the price level? Use the aggregate demand and supply model to explain youranswer.Please illustrate the answers using figures with aggregate demand and supply curves. Pleasealso briefly explain the answers in words.

and the long run. b. If the Bank of Canada cares about keeping output and employment at th levels, what is the policy response of the Bank of Canada? What is the in response on the price level? Use the aggregate demand and supply mode answer. Please illustrate the answers using figures with aggregate demand and supply cu also briefly explain the answers in words.

and the long run. b. If the Bank of Canada cares about keeping output and employment at th levels, what is the policy response of the Bank of Canada? What is the in response on the price level? Use the aggregate demand and supply mode answer. Please illustrate the answers using figures with aggregate demand and supply cu also briefly explain the answers in words.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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