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3. a) By using AD-AS model, explain how the presence of wage and or price rigidities can lead to persistent movements in output as a

3. a) By using AD-AS model, explain how the presence of wage and or price rigidities can lead to persistent movements in output as a result of demand shock.

b) The oil price increase in 2007-08 was a negative shock. Would you define it as a temporary or permanent supply shock? Explain.

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