AS' AS Price Level P2 P1 AD Real National Income Y2 Y1 8. The graph above reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to? (A) an increase in economic growth (B) an increase in input prices C. a decrease in the natural unemployment rate (D) less inflationary pressure

AS' AS Price Level P2 P1 AD Real National Income Y2 Y1 8. The graph above reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to? (A) an increase in economic growth (B) an increase in input prices C. a decrease in the natural unemployment rate (D) less inflationary pressure

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter15: The Shortcomings Of Free Markets

Section: Chapter Questions

Problem 5DQ

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In 2018, a cold front in Barbados increased both the demand for water heaters andgasolines. The usage of gasoline was 581 tonnes, an increase from 499 tonnes in theprevious year. The Petroleum Company of Barbados advised Government officials thatdemand could outweigh supply and asked companies to increase the supply. They alsoasked major gasoline users, such as power plants, to reduce demand. i. Illustrate the effect of the cold front on the demand for gasoline using a demandcurve diagram over the two years. ii. Assuming the Petroleum Company of Barbados did not issue a directive for anincrease in supply and a decrease in demand, explain the problem that would existin the economy and how would this be corrected over time.
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