Use an AS/AD diagram that shows an economy in its long-run equilibrium for this problem and consider the initial impact of the following circumstances on the aggregate demand, long-run aggregate supply, and short-run aggregate supply curves. Show and explain what happens in your graph and verbally.

a. A war in the Middle East rapidly increases the price of oil.

b. More and more consumers develop a fear that they are in danger of losing their jobs and businesses fear that they are in danger of losing their customers.

c. Add to this set of problems the uncertainty that a new administration introduces by pushing through significant social reform expected to increase business costs and reduce consumers' discretionary income.