What happens in the economy in the short run

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Reference no: EM132197744

Question: Part 1: Suppose that the graph below shows the U.S. economy in long-run equilibrium before the spike in oil prices. Drag the appropriate part(s) of the graph to show the effect of the oil price increase in the short run.

Part 2: Referring to the graph above, what happens in the economy in the short run? The price level decreases . Output decreases . Unemployment decreases .

Part 3: Now consider the long run. What happens when the economy returns to long-run equilibrium? Assume that there have been no policy changes in response to short-run events. The price level is higher than it was before the oil price spike. Output is the same as it was before the oil price spike. Unemployment is higher than it was before the oil price spike.

Reference no: EM132197744

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