The graph shows the aggregate demand (AD) curve and the long-run aggregate supply (LRAS) curve for a hypothetical economy. Suppose that the economy observes a reduction in the world price of oil, an input in many production processes. Show the effect of this change by shifting one of the curves in the graph. LRAS How will this change affect the rate of inflation? O Inflation will rise. O Inflation will be unchanged. O Inflation will fall. AD How will this change affect the growth rate? O The growth rate will be unchanged. Real GDP growih rate O The growth rate will decrease. O The growth rate will increase.

The graph shows the aggregate demand (AD) curve and the long-run aggregate supply (LRAS) curve for a hypothetical economy. Suppose that the economy observes a reduction in the world price of oil, an input in many production processes. Show the effect of this change by shifting one of the curves in the graph. LRAS How will this change affect the rate of inflation? O Inflation will rise. O Inflation will be unchanged. O Inflation will fall. AD How will this change affect the growth rate? O The growth rate will be unchanged. Real GDP growih rate O The growth rate will decrease. O The growth rate will increase.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply

Section: Chapter Questions

Problem 20E

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