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4. The 1974-1975 period experienced a recession caused by a supply shock. In particular following the Arab-Israeli War of 1973, the Organization of the Petroleum Exporting Countries (OPEC) took actions that increased the price of a barrel of oil from less than $3 to more than S10 (Hubbard and OBrien, 2015). This is illustrated in the aggregate supply-aggregate demand figure below. Assume that the aggregate demand curve did not shift between 1974 and 1975. LRAS1974 LRAS1975 SRAC1975 ? SRAS:974 Price level (GDP deflator, 2009- 100) 31.4 97 28.7 AD1974, 1975 5.38 5.39 5425.61 Real GDP (trillions of 2009 dollars) a) What is the growth rate in potential GDP from 1974 to 1975? b) In which year (1974 or 1975) is the unemployment rate higher? c) What is the inflation rate in 1975 (or from 1974 to 1975)? d) What is the growth rate of real GDP in 1974 (or from 1974 to 1975)?

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