Refer to scenario 1 and question 67. Starting from the new short-run equilibrium at point A, suppose that two additional shocks occur: (i) after the Lehman Brothers' bankruptcy, the financial crisis worsened, reducing private spending even further; and (ii) a fall in the price of oil due to the lower private spending. If the shock in (ii) restored the SRAS curve back to its original level, what happened with prices in the new equilibrium? (call this point B) O The shock in (i) increased aggregated demand and the price level, in the middle of the recession, increased. O The shock in (i) reduced aggregate demand and the price level, in the middle of the recession, fell. O The shock in (i) reduced the LRAS curve and the price level, in the middle of the recession, fell. O The shock in (i) increased the LRAS curve and the price level, in the middle of the recession, increased.

Refer to scenario 1 and question 67. Starting from the new short-run equilibrium at point A, suppose that two additional shocks occur: (i) after the Lehman Brothers' bankruptcy, the financial crisis worsened, reducing private spending even further; and (ii) a fall in the price of oil due to the lower private spending. If the shock in (ii) restored the SRAS curve back to its original level, what happened with prices in the new equilibrium? (call this point B) O The shock in (i) increased aggregated demand and the price level, in the middle of the recession, increased. O The shock in (i) reduced aggregate demand and the price level, in the middle of the recession, fell. O The shock in (i) reduced the LRAS curve and the price level, in the middle of the recession, fell. O The shock in (i) increased the LRAS curve and the price level, in the middle of the recession, increased.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 12P

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