(Please attach a graph showing your work for each question) Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock.  Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run. Show the adjustment process of the economy from the short-run to the long-run. What is the effect on unemployment in short-run and long-run? Can policymakers do something to accommodate this shock? Would the outcome be different in this case?

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Q: Attached: Figure 2: Keynes’s AD-AS Model Question 1  Changes in which factors could cause aggregate…

A:

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A: Dear student, you have asked multiple sub-part questions in a single post.In such a case, as per the…

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Q: What is the relationship in ADAS between oil price and inflation and also the unemployment rate?…

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