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Throughout much of the 1970s, the United States experienced rising energy prices. Assume that the US economy was in long-run equilibrium before these increases began. Use the aggregate demand- aggregate supply model to illustrate graphically the shock and your policy recommendation, assuming that maintaining price stability is your top policy in this economy. Also, state in words what happens to prices and output as a combined result of the supply shock and the recommended Fed policy. Explicitly describe your assumption about the shape of the SRAS curve

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M91678171

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