Explain events using the aggregate demand/supply model

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In 2007 the U.S. was faced with two events. At the beginning of 2007, oil prices more than doubled. A financial crisis hit the economy starting in August 2007 causing a reduction in consumer and business spending. These events led to a rise in the unemployment rate from 4.6% in 2007 to 5.5% by June 2008, with the inflation rate rising from 2.5% in 2006 to 5% in June 2008. Explain these events using the Aggregate Demand/Aggregate Supply Model.

Reference no: EM13184546

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