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?

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?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter6: How Statisticians Measure Inflation

Section: Chapter Questions

Problem 3TY

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VII. Assume that the economy starts at the natural level of output. Now suppose there is a decline in business confidence, so that investment demand falls for any interest rate. a. In an AD-AS diagram, show what happens to output and the price level in the short run and the medium run. b. What happens to the unemployment rate in the short run and in the medium run?
2. How do you explain the cyclical unemployment through an AD-AS model?
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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Maps Paraphrasing Tool ... New Tab ent - Sem 2 2022.pdf 2 / 3 G Report Grammarly 100% + + » What is the current environment in the USA and Australia? b) Define unemployment and its measurement. What is the current environment in the USA and Australia? c) Define inflation and its measurement. What is the current environment in the USA and Australia? Question 2 Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of a increase in government spending and an increase in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis. Question 3 Explain in detail the process of Monetary Policy transmission of an increase in the cash interest rate. Use relevant graphs to describe how a Central Bank's action on the interest cash rate ripple through the economy and lead to the target policy goal. (Three connected diagrams should…
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Why do sticky wages and prices increase the impact of an economic downturn on unemployment and recession?
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