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Often, more than one kind of shock hits the economy at once. When-(Answered)

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Often, more than one kind of shock hits the economy at once. When this happens, the different shocks could push inflation (or real growth) in different directions in the short run, leaving the final short-run result ambiguous. What is most likely to happen to inflation and real output growth in the following cases: Will they rise, fall, or can?t you tell with the information given? Note that you will often be able to definitely know the answer for one but not the other. In each case draw a relevant dynamic aggregate demand and supply diagram to assist your explanation.

a.?????? A nation?s scientists invent many new Internet search tools, raising current productivity and making investors optimistic about future inventions as well.


b.?????? A government raises taxes and its economy has a year of excellent weather for growing crops.


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c.?????? Oil prices skyrocket and the central bank slows the rate of money growth.


 

Paper#9255798 | Written in 27-Jul-2016

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