The price of a barrel of oil doubled between 2007 and the middle of 2008. To make matters worse, a financial crisis hit the U.S. economy starting in August of 2007
Which of the following is an appropriate description of the mechanism that would have ensued? A) The increase in the price of oil would have immediately shifted the AS curve to the right.
B) The financial crisis would have led to a sharp contraction in spending shifting the AD curve to the right.
C) Shifts in both the AD and the AS curve would have ensued in the short-run but as long as neither shock had an impact on potential output, ultimately unemployment will have been unaffected in the long run.
D) All of the above.
E) None of the above.
C
You might also like to view...
The monetary base is $1,000 billion and the money multiplier is 5.5. What is the size of the money supply?
What will be an ideal response?
In general, the buyers will tend to pay a bigger share of a tax on a good when:
A. The price elasticities of supply and demand are low B. The price elasticities of supply and demand are high C. The price elasticity of supply is low and the price elasticity of demand is high D. The price elasticity of supply is high and the price elasticity of demand is low