Question: Applying the AD/AS Model Consider the following two events: (I)Growth surges in East Asia. (II)A sharp increase in oil price. Use the Aggregate Demand-Aggregate Supply

Applying the AD/AS Model

Consider the following two events:

(I)Growth surges in East Asia.

(II)A sharp increase in oil price.

Use the Aggregate Demand-Aggregate Supply model to explain:

(a)The separate effects of each event on real GDP and the price level, starting from long-run equilibrium.

(b)The combined effects of theses events on real GDP and the price level, starting from long-run equilibrium.

(c)The actions the government or central bank might want to take to influence the economy. Justify your answer.

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