Austria is one of the largest exporters of oil. At the end of 2019, the global price of oil fell substantially. For this question, treat oil as a final good, not an input into production. Begin at long-run equilibrium. 1. As a result of the fall in the price of oil, Austria's AD (increased,decreased,remained the same,changed ambiguously), SRAS (increased,decreased,remained the same,changed ambiguously), and LRAS (increased,decreased,remained the same,changed ambiguously). GDP (increased,decreased,remained the same,changed ambiguously), unemployment (increased,decreased,remained the same,changed ambiguously), and the price level (increased,decreased,remained the same,changed ambiguously). 2. Assume that the government intervened to resolve the output gap. As a result of the government intervention, AD (increased,decreased,remained the same,changed ambiguously), SRAS (increased,decreased,remained the same,changed ambiguously), and LRAS (increased,decreased,remained the same,changed ambiguously). GDP (increased,decreased,remained the same,changed ambiguously) relative to before the crisis, unemployment (increased,decreased,remained the same,changed ambiguously) relative to before the crisis, and the price level (increased,decreased,remained the same,changed ambiguously)relative to before the crisis. 3. Now assume that the government did not intervene and instead allowed the economy to self-correct. As a result of the self-correction, AD (increased,decreased,remained the same,changed ambiguously), SRAS (increased,decreased,remained the same,changed ambiguously), and LRAS (increased,decreased,remained the same,changed ambiguously). GDP (increased,decreased,remained the same,changed ambiguously) relative to before the crisis, unemployment (increased,decreased,remained the same,changed ambiguously) relative to before the crisis, and the price level (increased,decreased,remained the same,changed ambiguously) relative to before the crisis.
Austria is one of the largest exporters of oil. At the end of 2019, the global price of oil fell substantially. For this question, treat oil as a final good, not an input into production. Begin at long-run equilibrium.
1. As a result of the fall in the price of oil, Austria's AD (increased,decreased,remained the same,changed ambiguously), SRAS (increased,decreased,remained the same,changed ambiguously), and LRAS (increased,decreased,remained the same,changed ambiguously). GDP (increased,decreased,remained the same,changed ambiguously),
2. Assume that the government intervened to resolve the output gap. As a result of the government intervention, AD (increased,decreased,remained the same,changed ambiguously), SRAS (increased,decreased,remained the same,changed ambiguously), and LRAS (increased,decreased,remained the same,changed ambiguously). GDP (increased,decreased,remained the same,changed ambiguously) relative to before the crisis, unemployment (increased,decreased,remained the same,changed ambiguously) relative to before the crisis, and the price level (increased,decreased,remained the same,changed ambiguously)relative to before the crisis.
3. Now assume that the government did not intervene and instead allowed the economy to self-correct. As a result of the self-correction, AD (increased,decreased,remained the same,changed ambiguously), SRAS (increased,decreased,remained the same,changed ambiguously), and LRAS (increased,decreased,remained the same,changed ambiguously). GDP (increased,decreased,remained the same,changed ambiguously) relative to before the crisis, unemployment (increased,decreased,remained the same,changed ambiguously) relative to before the crisis, and the price level (increased,decreased,remained the same,changed ambiguously) relative to before the crisis.
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