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Oil Prices Have Risen Temporarily,due to Political Uncertainty in the Middle

question 62

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Oil prices have risen temporarily,due to political uncertainty in the Middle East.An advisor to the Bank of Canada suggests,"Higher oil prices reduce aggregate demand.To offset this we must increase the money supply.Then the price level won't need to adjust to restore equilibrium,and we'll prevent a recession." Analyze this statement using the IS-LM model.


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