Does the economy return to long-run equilibrium via self-correcting mechanisms?

Starting from long-run equilibrium, the long-run impact

Starting from long-run equilibrium, the long-run impact

Question

Starting from long-run equilibrium, the long-run impact(s) of a sharp rise in oil prices, compared with the original equilibrium, is(are):

A. higher inflation

b. higher output

c. higher inflation and higher output

d.lower inflation and lower output

e. no change in inflation or output.

With the sharp rise in oil prices, does the aggregate supply curve shift to the left/inwards? If so, is this just the short-run impact? What is the long-run outcome? Does the economy return to long-run equilibrium via self-correcting mechanisms?

thanks so much

Starting from long-run equilibrium, the long-run impact


 

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