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Assume an economy is in equilibrium at its natural rate of output and only a fraction of the firms in the economy have fixed prices. Assume there is a temporary spike in the price of oil (which is a major input in this particular economy’s production process).

As a result of this shock the price level in the economy will
Select Option risefallstay the same
while output will
Select Option rise above the natural ratefall below the natural rateremain at the natural rate
in the short run.
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