Consider the open economy displayed in the figure below. Firms in this nation do import raw materials and other productive inputs from abroad, and foreign residents purchase many of the nation’s goods and services.
a. Using the three point curved line drawing tool, determine the most likely short-run effect on this nation’s economy if there is a significant raw materials price inflation in other nations around the world. Label this line ‘Shock’.
Carefully follow the instructions above, and only draw the required objects.
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