Using
the AD-AS model, explain and illustrate how a supply shock can push an
economyinto a...

Question

Using
the AD-AS model, explain and illustrate how a supply shock can push an
economyinto a recession.

Robert · Accepted Answer

Using the AD-AS model, explain and illustrate how a supply shock can push an economy into a recession.
Initially the economy is in long run equilibrium at full employment level at E. At this point the SRAS ( upward sloping). LRAS( vertical at Yfe) and A intersect at 1 common point.

Using the AD-AS model, explain and illustrate how a supply shock can push an economyinto a recession.

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