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Elude oil Historical Prices 1 1aso ems} 123 Major con-cum 1 mm: IS. The chart above shows the historical price of a barrel of oil

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Elude oil Historical Prices 1 1aso ems} 123 Major con-cum 1 mm: IS. The chart above shows the historical price of a barrel of oil in US dollars. Price shocks can sometimes be benecial for the economy. Consider the period between the early to mid- lg's and most of the 1990's in the chart above. We that, at the start of this period, an economy was operating at its full employment level of output, but oil prices were declining. Describe the imth a decrease in oil prices will have on output and ination. Do you believe some form of stabilisation policy is necessary in the scenario described above? Explain and justify your decision

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