2. A temporary change in the price of oil can affect an economy in many ways. Here we will model a decrease in the price of oil using the aggregate demand-aggregate supply model. Our shock in this question will be: the price of oil temporarily declines, holding all else constant. Let's start with assuming the US was producing at the full- employment level of output (Yp) with an arbitrary price level (P) before the decline in oil prices. a. Represent the US economy at this point with an aggregate demand-aggregate supply graph. Label this initial equilibrium as point A.
2. A temporary change in the price of oil can affect an economy in many ways. Here we will model a decrease in the price of oil using the aggregate demand-aggregate supply model. Our shock in this question will be: the price of oil temporarily declines, holding all else constant. Let's start with assuming the US was producing at the full- employment level of output (Yp) with an arbitrary price level (P) before the decline in oil prices. a. Represent the US economy at this point with an aggregate demand-aggregate supply graph. Label this initial equilibrium as point A.
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter9: An Introduction To Basic Macroeconomic Markets
Section: Chapter Questions
Problem 3CQ
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