The price of oil fell sharply in 1986 and again in 1998.
A. Show the impact of such a change in both the aggregate-demand/aggregate-supply diagram and the Phillips-curve diagram. What happens to inflation and unemployment in the short run?
B. Do the effects of this event mean there is no short-run tradeoff between inflation and unemployment? Why or why not?

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A Impact on Aggregate DemandAggregate Supply ADAS and Phillips Curve diagrams 1 Aggregate DemandAggregate Supply ADAS Diagram The sharp fall in oil pr... View the full answer