Describe each of the following as a positive demand shock, a negative demand shock, a positive supply shock, or a negative supply shock, and specify how each are represented on the Phillips curve
a. a sudden increase in oil prices
b. a large increase in spending on residential construction
c. a sudden decrease in household wealth resulting from a stock market crash
d. a substantial increase in productivity following technological advancements
a. A sudden increase in oil prices is a negative supply shock, represented by an upward shift of the Phillips curve.
b. A large increase in spending on residential construction is a positive demand shock, represented by a movement up along the Phillips curve.
c. A sudden decrease in household wealth resulting from a stock market crash is a negative demand shock, represented by a movement down along the Phillips curve.
d. A substantial increase in productivity following technological advancements is a positive supply shock, represented by a downward shift of the Phillips curve.
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