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Aggregate supply-demand

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Please help with the following problem.

You observe that output is above full-employment output. Politicians are arguing about the possible reasons. One party claims that this is due to a drop in world oil prices. The other party claims that this is due to an increase in consumer spending. Using aggregate supply-aggregate demand graphs, explain (a) how each of the above reasons could cause an increase in output, and (b) what evidence you could use to determine which one of these had occurred.

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In this solution, the aggregate supply-demand is examined.

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Problem: You observe that output is above full-employment output. Politicians are arguing about the possible reasons. One party claims that this is due to a drop in world oil prices. The other party claims that this is due to an increase in consumer spending. Using aggregate supply-aggregate demand graphs, explain (a) how each of the above reasons could cause an increase in output, and (b) what evidence you could use to determine which ...

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