Refer to scenario 1 and question 67. Starting from the new short-run equilibrium at point A, suppose that two additional shocks occur: (i) after the Lehman Brothers' bankruptcy, the financial crisis worsened, reducing private spending even further; and (ii) a fall in the price of oil due to the lower private spending. If the shock in (ii) restored the SRAS curve back to its original level, what happened with prices in the new equilibrium? (call this point B) O The shock in (i) increased aggregated demand and the price level, in the middle of the recession, increased. O The shock in (i) reduced aggregate demand and the price level, in the middle of the recession, fell. O The shock in (i) reduced the LRAS curve and the price level, in the middle of the recession, fell. O The shock in (i) increased the LRAS curve and the price level, in the middle of the recession, increased.
Refer to scenario 1 and question 67. Starting from the new short-run equilibrium at point A, suppose that two additional shocks occur: (i) after the Lehman Brothers' bankruptcy, the financial crisis worsened, reducing private spending even further; and (ii) a fall in the price of oil due to the lower private spending. If the shock in (ii) restored the SRAS curve back to its original level, what happened with prices in the new equilibrium? (call this point B) O The shock in (i) increased aggregated demand and the price level, in the middle of the recession, increased. O The shock in (i) reduced aggregate demand and the price level, in the middle of the recession, fell. O The shock in (i) reduced the LRAS curve and the price level, in the middle of the recession, fell. O The shock in (i) increased the LRAS curve and the price level, in the middle of the recession, increased.
Chapter22: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 12P
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