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ECS1601 Assignment 4 Semester 1 &2 2022 Last document update:   ago

Upward shifts of the AS curve are often re ferred to as adverse supply shocks. They present policymakers with a difficult situation. Expansionary fiscal or monetary policies will increase aggreg ate demand and therefore production, income and employment, but at the same time the price level will be increased even further. In other words, demand management policies can be used to counteract the effects of a supply shock on production, income and employment but only at the cost of even higher...