Consider a temporary oil price increase

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Reference no: EM13981104

Consider a temporary oil price increase. Using the AD-AS model (with a Keynesian perspective), answer the following questions.

a. In the absence of any policy intervention, what will happen to prices and output over the short- and long-run?

b. Could the Federal Reserve simultaneously offset both the short-term change in prices and the short-term change in employment/output? Briefly explain.

Reference no: EM13981104

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