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In each case explain the impact of the AD or AS shock on inflation, output, real interest rates and real exchange rates in short-run and

In each case explain the impact of the AD or AS shock on inflation, output, real interest rates and real exchange rates in short-run and in long-run. Explain how the variables change as the economy goes from short-run to long-run.

  1. Fiscal Policy. The government cuts taxes or increases transfers (e.g. Wage subsidies)
  2. Trade Shock. An increase in net exports caused by an export subsidy or an import tariff.
  3. Input price shock.An increase in oil prices caused by OPEC cutting oil output.
  4. Consumption shock. A decrease in household consumption caused by the bursting of a housing bubble.

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