Provide an example of a recession

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"In the event of a negative short-term aggregate supply shock, accommodating policy can be effectively used, but at the cost of higher inflation."

1. Use the AD-AS model including both the short-run and long-run supply curves to explain the statement above. Label each curve as well as different levels of price and output to get full credit.

2. Provide an example of a recession caused by a negative aggregate supply shock in the U.S. history.

Reference no: EM132639917

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