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Analyse the case of a negative supply shock caused by an increase in oil prices and compare with the shock caused by the Covid pandemic.
Analyse the case of a negative supply shock caused by an increase in oil prices and compare with the shock caused by the Covid pandemic.
a. What would be the similarities and differences between the two shocks?
b. What would be the effect of an expansionary economic policy (increase in aggregate demand)? Graph
c. What measures or government intervention would be most appropriate to deal with both types of shocks? Graph
d. Compare the adjustment in both cases with and without government intervention. Graph
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