2. The 1974-1975 recession clearly illustrates how a supply shock affect the economy. Following the Arab-Israeli War of 1973, the Organization of Petroleum Exporting Countries (OPEC) took action that increased the price of a barrel of oil from less that $3 to more than $10. Use the information and the statistics in the following table to draw a dynamic aggregate demand and aggregate graph showing supply macroeconomic equilibrium for 1974 and 1975. Assume that aggregate demand curve did not shift between 1974 and 1975. Provide a brief explanation of your graph. Actual Real GDP Potential GDP Price Level 1974 $5.39 trillion $5.42 trillion 28.7 1975 $5.38 trillion $5.61 trillion 31.4 Esibility: Investigate

2. The 1974-1975 recession clearly illustrates how a supply shock affect the economy. Following the Arab-Israeli War of 1973, the Organization of Petroleum Exporting Countries (OPEC) took action that increased the price of a barrel of oil from less that $3 to more than $10. Use the information and the statistics in the following table to draw a dynamic aggregate demand and aggregate graph showing supply macroeconomic equilibrium for 1974 and 1975. Assume that aggregate demand curve did not shift between 1974 and 1975. Provide a brief explanation of your graph. Actual Real GDP Potential GDP Price Level 1974 $5.39 trillion $5.42 trillion 28.7 1975 $5.38 trillion $5.61 trillion 31.4 Esibility: Investigate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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