1. Drought In South Africa destroyed farm crops and drove up the price of food. What Is the effect on the short-run trade-off between inflation and unemployment? 2. Give an example of a favourable and unfavourable shock to the aggregate supply. Use the model of aggregate demand (AD) and aggregate supply (AS) to explain the effects of such shocks. How do these shocks affect the AD-AS curves?

1. Drought In South Africa destroyed farm crops and drove up the price of food. What Is the effect on the short-run trade-off between inflation and unemployment? 2. Give an example of a favourable and unfavourable shock to the aggregate supply. Use the model of aggregate demand (AD) and aggregate supply (AS) to explain the effects of such shocks. How do these shocks affect the AD-AS curves?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Aggregate Demand And Aggregate Supply

Section15.2: Explaining Short-run Economic Fluctuations

Problem 2QQ

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question 2: In Figure 2, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation, and recession?
Give an example of a favourable and unfavourable shock to the aggregate supply. Use the model of aggregate demand (AD) and aggregate supply (AS) to explain the effects of such shocks. How do these shocks affect the AD-AS curves?
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