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The graph shows that if policymakers respond immediately to an oil price shock by stimulating aggregate demand, shifting AD to AD* then the level of output will remain constant. This is known as Accommodating Policies. The drawbacks of taking this approach are that the level of inflation would be higher. Therefore there exists a trade-off for policymakers. This trade-off is between the inflationary impact and the recessionary effects of a supply shock. In order to assist policymakers with their decision, the nature of the shock should be considered. If the shock were transitory, then stimulating aggregate demand could be used to avert a drop in output. If the shock were permanent, it is highly unlikely that aggregate demand policy would be able to prevent a drop in output.
Whilst this paper will be unable to analyse the success of the policymakers in the UK throughout the sample period, it is able to observe the effects that a shock in oil price would impact upon inflation and economic growth as these are two of the indicators which will be analysed.
explain with illustration the meaning of credit creation in commercial banks
1. Nations trade what they produce in excess of their own consumption to: A) generate jobs for the domestic economy. B) earn “good will” from the World Bank. C) prevent chronic sur
The price level is the monetary value of a good or service.
the production of 200 units of consumer goods and 300 units of capital goods : a) indicates full employment b) may be a result of unemployment c) may be impossible for now d)
Incentives Incentives designed to increase effort, reward enterprise and encourage saving and investment include: an emphasis on the effect of a reduction in the margi
Q. Explain function of AS-AD model? The function of AS-AD model is to extend IS-LM model so that we can analyze situations where Y > Y OPT . To achieve this, we should make P e
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You should now find a press release from the Board of Governors of the Federal Reserve System, dated December 16, 2009, which discusses the decisions of the Federal Open Market Com
Price 10,9,8,7,6,5,4,3,2,1 QD 0,1,2,3,4,5,6,7,8,9,10 TR? Ed?.
Determine the present worth of a geometric gradient series with a cash flow of $50,000 in year 1 and increases of 6% each year through year 8. The interest rate is 10% per year.
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