In the summer of 2008, global oil prices spiked to extremely high levels before coming down again at the end of that year. This temporary event had global effects because oil is an important resource in the production of many goods and services. 1st attempt
Part 1 Suppose that the graph below shows the U. S. economy in the long-run equilibrium before the spike in oil prices.
Drag the appropriate part(s) of the graph to show the effect of the oil price increase in the short run.
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Part 2 Referring to the graph above, what happens in the economy in the short run?
The price level
increases, decreases, stays the same
Output
increases, decreases, stays the same
Unemployment
increases, decreases, stays the same
Part 3 Now consider the long run. What happens when the economy returns to long-run equilibrium? Assume that there have been no policy changes in response to short-run events.
The price level is
higher than, lower than, the same as
it was before the oil price spike.
Output is
higher than, lower than, the same as
it was before the oil price spike.
Unemployment is
higher than, lower than, the same as
it was before the oil price spike.