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