# Cam, the economy is in long- uilibrium at point E, when an 4. In the accomo...

###### Question:

cam, the economy is in long- uilibrium at point E, when an 4. In the accomo run macroes oil shock shifts th to SRAS. Bas, questions. ccompanying diagram, the economy acroeconomic equilibrium at pe hifts the short-run aggregate supply curve S.. Based on the diagram, answer the foll answer the following LRAS Aggregate price SRASZ level SRAS .. AD1 Real GDP a. How do the aggregate price level and aggregate output change in the short run as a result of the oil shock? What is this phenomenon known as? b. What fiscal or monetary policies can the govern- ment use to address the effects of the supply shock? Use a diagram that shows the effect of policies cho- sen to address the change in real GDP. Use another diagram to show the effect of policies chosen to dress the change in the aggregate price level. O supply shocks present a dilemma for govern c. Why do supply sh ment policy makers?

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