Economic Impacts of Supply Shocks

The video tutorial by Domenico from Ezinomics explores different inflation models, focusing on cost-push inflation. It uses the 1973 oil crisis as a classic example of a supply shock, explaining how the reduction in oil supply led to a significant price increase, impacting the global economy. The tutorial also discusses the role of petroleum in modern economies and examines the COVID-19 pandemic as a recent supply shock. Through graphical analysis, it illustrates the effects of supply shocks on GDP, inflation, and unemployment, highlighting the recessionary gap and inflation. The video concludes by comparing the Keynesian and Monetarist models, emphasizing their relevance in different economic contexts.

What type of inflation is illustrated by the 1973 oil crisis?

• Deflation

• Hyperinflation

• Cost-push inflation

• Demand-pull inflation

How did the 1973 oil crisis affect the price of oil?

• It doubled

• It remained stable

• It decreased by 50%

• It increased by 300%

What was a significant impact of the 1973 oil crisis on global economies?

• Damage to both developed and developing economies

• Stabilization of oil prices

• Increased employment

• Economic growth

What recent event is considered a supply shock similar to the 1973 oil crisis?

• The 2008 financial crisis

• The COVID-19 pandemic

• The 2000 dot-com bubble

• The 1997 Asian financial crisis

How did the COVID-19 pandemic disrupt global supply chains?

• By increasing oil production

• By causing factory shutdowns

• By reducing consumer demand

• By stabilizing global markets

What happens to real GDP during a supply shock like the 1973 oil crisis?

• It fluctuates unpredictably

• It decreases

• It remains unchanged

• It increases significantly

What is the effect on unemployment during a supply shock?

• Unemployment is unaffected

• Unemployment decreases

• Unemployment remains stable

• Unemployment increases

Which economic model struggled to explain the simultaneous increase in inflation and decrease in output during the 1970s?

• Monetarist model

• Keynesian model

• Classical model

• Supply-side model

What did the supply shock of the 1970s demonstrate about the Keynesian model?

• It was fully capable of explaining the situation

• It could not account for simultaneous inflation and output decrease

• It predicted the supply shock accurately

• It was irrelevant to the situation

Which model gained relevance due to the supply shock in the 1970s?

• Monetarist model

• Keynesian model

• Supply-side model

• Classical model