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If There Is a Large and Sudden but Temporary Increase

question 13

Essay

If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?


Definitions:

Erosion

The process of gradual diminishment or reduction, often used in finance to describe the erosion of value or profit.

Incremental Cash Flow

The additional cash flow a project generates compared to a baseline or the current level.

Cost Of Goods Sold

Financial expenditures directly linked to the production of goods sold by a business, involving materials and labor.

Pro Forma Statements

Financial statements prepared to predict the financial position of a company under certain hypothetical scenarios or planning for future operations.

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