U.S. economy in 2007 lead to the Great Recession of 2007-2009. Using a short-run AD-AS graph, draw the oil shock then the housing shock to move from Y and P1, to Y2 and P2, and to Y and P3.

a. Draw the original AD-AS with AD1, AS1, E1, Y1 and P1 labelled

. b. Crude oil prices increased from $54 to $93 per barrel over 2007. Illustrate this change by shifting the appropriate curve, labelling it as A_2. Then label E2, Y2 and P2.

c. Home prices fell by an average of 3% over 2007. Illustrate this change by shifting the appropria curve, labelling it as A_3. Then label E3, Y3 and P3