World real gdp and the price level

Reference no: EM1374351

Assume the recent volcanic events in Iceland, which disrupted European air travel significantly, represented just starting. In other words, assume that experts forecast a world-wide series of big eruptions from active volcanoes. The Yellowstone caldera is anticipated to be the largest--the caldera is roughly 30 miles by 40 miles.

Use the AD/AS model to explain what will happen in the short run and long run to the world real GDP and the price level. Moreover, describe what policymakers could do after this has happened.

Reference no: EM1374351

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