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:

Unconscious

The part of the mind that is inaccessible to the conscious mind but that affects behaviors and emotions.

Psychosexual Development

Freud's theory describing how personality develops during childhood through a series of stages centered on erogenous zones.

Oral Stage

The first stage in Freud’s psychosexual development, characterized by an infant's pleasure centers on the mouth.

Anal

Relating to the anus or rectum, often used in the context of psychosexual stages or cleanliness habits.