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Consider the following economic events. a. Political turmoil in the Middle East causes oil prices to skyrocket, acting as a negative supply shock on the
Consider the following economic events. a. Political turmoil in the Middle East causes oil prices to skyrocket, acting as a negative supply shock on the US economy. This negative supply shock makes private investment less productive, decreasing the expected future MPK at each level of capital stock. Show how this change affects the desired level of capital and investment. Explain and showgraphically
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