ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The first is through its effect on aggregate supply; this has, come to be called a “price shock.” In this view, an oil price increase results in an initial upward shift in the aggre-gate supply curve that will raise prices; output falls along a downward-sloping aggregate demand curve.

Detailed explanation-2: -The housing market was deeply impacted by the crisis. Evictions and foreclosures began within months. The stock market, in response, began to plummet and major businesses worldwide began to fail, losing millions. This, of course, resulted in widespread layoffs and extended periods of unemployment worldwide.

Detailed explanation-3: -A reduction in aggregate demand causes a leftward shift in the aggregate demand curve. This reduction lowers the GDP and price levels. This leads to economic contractions, making demand fall below the economy’s potential GDP, thereby causing a recession. Real GDP then falls, and so does the aggregate price level.

Detailed explanation-4: -Higher aggregate demand and aggregate supply raise GDP, hence lowering unemployment. As a result, the employment level increases.