Using an AD, SRAS, and LRAS curve, explain the effect of the following events on the aggregate-output,
unemployment and price level both in the short-run and in the long-run. Explain the process by which the economy moves from one long-run equilibrium point to another.
(a) There is an increase in oil-prices (and no intervention from the government or the Fed).
(b) The Fed increases money supply (after the initial increase in oil-prices).
Initially n the economy is in longlen
equidb rium at A. Now Due to macase in
price 8 Short run Aggregate Supply…