Use the IS-LM model to analyze the general equilibrium effects of a permanent increase in the price of oil (a permanent adverse supply shock) on current output, employment, the real wage, national saving, consumption, investment, the real interest rate, and the price level. Assume that besides reducing the current productivity of capital and labour, the permanent supply shock lowers both the expected future MPK and households' expected future incomes. Show that if the real interest rate rises at all, it will rise less than in the case of a temporary sup-shock that has an equal effect on current output.