An adverse supply shock causes inflation to _____.
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Why does the anchored inflation expectation shorten the recession caused by the adverse supply curve? If the central bank has no credibility, what it does to solve the adverse supply shock? What is the disadvantage of the central bank decides to take actions of solving the supply shock compared to the central bank let the economy to self-correct?
An oil cartel effectively increases the price of oil by 100percent, leading to an adverse supply shock in both Country A andCountry B. Both countries were in long-run equilibrium at the samelevel of output and prices at the time of the shock. The centralbank of Country A takes no stabilizing-policy actions. After theshort-run impacts of the adverse supply shock become apparent, thecentral bank of Country B increases the money supply to return theeconomy to full employment.a. Describe the short-run impact of the adverse supply shock onprices and output in each country.b. Compare the long-run impact of the adverse supply shock onprices and output in each country.
An adverse supply shock will shift the short-run aggregate supply..