1. How would a supply shock, such as the exogenous increase in the price of oil analyzed in Section 8.5 , affect the aggregate price level and the level of real output in the new classical model? 2....

1. How would a supply shock, such as the exogenous increase in the price of oil analyzed in Section 8.5 , affect the aggregate price level and the level of real output in the new classical model?

2. Explain the real business cycle theorists’ views on the proper conduct of monetary and fiscal policies.