Based on Your Understanding of the AS- AD Model and IS-

question 63

Essay

Based on your understanding of the AS- AD model and IS- LM model, graphically illustrate and explain what effect a decrease in the price of oil will have on the economy. In your graphs, clearly illustrate the short- run and medium- run equilibria. Also include in your answer an explanation of the effects of this change in the price of oil on the labour market and the equilibrium real wage.

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Definitions:

High Construction Costs

High Construction Costs refer to the significantly increased expenses associated with building infrastructure, facilities, or housing, often due to materials, labor, or regulatory issues.

Solar Thermal System

A system that converts sunlight into heat energy, which can be used for heating water, spaces, or generating electricity.

Carbon Dioxide Emissions

The release of CO2 into the atmosphere, primarily from burning fossil fuels, contributing to global climate change.

Energy Resource

A natural resource that can be converted into other forms of energy to perform work, such as coal, solar, or wind energy.