In stabilizing national economies, Keynesian demand management policies proved to be effective in many incidences except the case of supply shocks. Supply shocks caused by a sharp decline in oil supply or/and increase in its prices led world economies face with double trouble in 1970s Today's inflationary pressures most economies are currently under even without full recovery from the recession caused by COVID 19, resembles a kind of supply shock. Using an AD-AS model. a.define a short run equilibrium in an economy which still show a small recessionary gap. b show explain) the effects of increase in energy prices in this case c. show (explain) the equilibrium caused by this supply shock with new price level and equilibrium level of output. d. show (explain) why typical demand management policies do not work to solve the problem completely. You can provide examples of current policies to slove this problem. e suggest and explain an alternative government policies that can be followed to solve such problems. Are you aware of any successful case from the recent economic history?

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