Refer to scenario 1 and question 67. Starting from the new short-run equilibrium at point A, suppose that two additional shocks occur: (i) after the Lehman Brothers' bankruptcy, the financial crisis worsened, reducing private spending even further; and (ii) a fall in the price of oil due to the lower private spending. If the shock in (ii) restored the SRAS curve back to its original level, what happened with prices in the new equilibrium? (call this point B) O The shock in (i) increased aggregated demand and the price level, in the middle of the recession, increased. O The shock in (i) reduced aggregate demand and the price level, in the middle of the recession, fell. O The shock in (i) reduced the LRAS curve and the price level, in the middle of the recession, fell. O The shock in (i) increased the LRAS curve and the price level, in the middle of the recession, increased.

Refer to scenario 1 and question 67. Starting from the new short-run equilibrium at point A, suppose that two additional shocks occur: (i) after the Lehman Brothers' bankruptcy, the financial crisis worsened, reducing private spending even further; and (ii) a fall in the price of oil due to the lower private spending. If the shock in (ii) restored the SRAS curve back to its original level, what happened with prices in the new equilibrium? (call this point B) O The shock in (i) increased aggregated demand and the price level, in the middle of the recession, increased. O The shock in (i) reduced aggregate demand and the price level, in the middle of the recession, fell. O The shock in (i) reduced the LRAS curve and the price level, in the middle of the recession, fell. O The shock in (i) increased the LRAS curve and the price level, in the middle of the recession, increased.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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