Question: ASAD Model. Analyze the following events using the ASAD model. What happens to price, output and unemployment in the short-run, transition from the short-run to long-run, and in the long-run? How should the Fed react to stabilize output and unemployment?
a. An exogenous negative shock to the velocity of money (A permanent decrease in V).
b. An exogenous positive shock to oil price (A temporary increase in oil price).