Decreasing costs of extracting oil and ga

Reference no: EM13731739

AD-AS Model

i) Technological advances have led to decreasing costs of extracting oil and gas, and nuclear reactor that produce higher levels or electricity output. How would the increasing availability of energy sources affect energy prices and how would firms be affected?

ii) Using the AD-AS model, show how the effects in part (i) affects output and inflation in the short run and in the long run, assuming no policy response.
iii) What happens if the government or the central bank responds to the effects in part (ii)? Show using an AD-AS model

Reference no: EM13731739

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