For the following economic change,firstexplainwith wordsthe short-run adjustments you would expect to see in aggregate supply and aggregate demand, indicating the type of short-run gap created.Second, explainwith wordswhat will change in the adjustment process from short-run to long-run.Assume we start at equilibrium, and that potential GDP isunaffectedby these changes.

New found political stability in major oil-producing regions decreases the price of imported oil (Canada is a net oil-importing country).

In the short run,

The AS curve will-----------

The AD curve will---------

.

GDP will----------

.

The price level will-------------

.

A/an----------- output gap is created.

In the long run,

Wages and other factor prices will-------------

.

The AS curve will----------------

.

GDP will---------------

.

The price level will-----------

Options- shift to right, shift to left, remain unchanged, increase, decrease, inflationary, recessionary

.