The unemployment rate from changing in the short run

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Suppose that the RBA decides to respond immediately to the decrease in the price of oil. In particular, suppose that the RBA wants to prevent the unemployment rate from changing in the short run, after the decrease in the price of oil. (c) What should the RBA do to prevent the unemployment rate from changing in the short run? Show how the RBA’s action, combined with the decrease in the price of oil, affects the AS-AD diagram in the short run and medium run. (d) How do output and the price level in the short run and the medium run compare to your answers from part (a)? (e) How do the short-run and medium-run unemployment rates compare to your answers from part (b)?

Reference no: EM131196036

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