Answer the following two questions related to the 1970s oil shock (oil prices rose significantly). Use aggregate demand and supply models to examine...
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Answer the following two questions related to the 1970s oil shock

(oil prices rose significantly). Please illustrate and explain your answers by using figures with aggregate demand and supply curves.


a. Use aggregate demand and supply models to examine the impact of the 1970s oil shock on output and the price level in both the short run and the long run.


b. If the cenrtral bank used monetary policy to combat the effects of the oil shock, should the central bank increase or decrease money supply? Use aggregate demand and supply models to examine the impact of this stabilization policy on the price level and output.

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Subject: Business, Economics
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