Question: Suppose the price of oil falls sharply (as it did in 1986 and again in 1998). a. Show the impact of such a change in

Suppose the price of oil falls sharply (as it did in 1986 and again in 1998).

a. Show the impact of such a change in both the aggregate-demand/aggregate-supply diagram and in 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 trade-off between inflation and unemployment? Why or why not?

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