Question
. The chart above shows the historical price of a barrel of oil. Price shocks can sometimes be beneficial for the economy. Consider the period
. The chart above shows the historical price of a barrel of oil. Price shocks can sometimes be beneficial for the economy. Consider the period between the early to mid-1980's and most of the 1990's in the chart above. Assume 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 impact a decrease in oil prices will have on output and inflation. What policy option(s) is(are) open for policymakers faced with the above scenario. Explain your policy suggestion(s).
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