The Russia-Ukraine war triggers a surging of crude oil price to a record high that leads to a negative supply shock of an economy. If the economy is currently at the full-employment output, how does it affect the aggregate price and real output level in the short- and long-run if the central bank does not carry out any stabilization policies? Explain with the aid of an aggregate demand-aggregate supply diagram.

The Russia-Ukraine war triggers a surging of crude oil price to a record high that leads to a negative supply shock of an economy. If the economy is currently at the full-employment output, how does it affect the aggregate price and real output level in the short- and long-run if the central bank does not carry out any stabilization policies? Explain with the aid of an aggregate demand-aggregate supply diagram.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter15: The Debate Over Monetary And Fiscal Policy

Section: Chapter Questions

Problem 5DQ

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