Please answer each question in one page:

The IS-LM-PC model connects the goods market, the financial market and the labor market.

1) Present a graph (hand-drawn graphs must be scanned and uploaded) of the model and explain the graph in words (e.g. slopes of the curves, what they depict, how are the three markets connected, etc.).

2) Using the IS-LM-PC model graph show the effect of an increase in the price of oil on equilibrium output, price and interest rate both in the short run and the long run. Also explain in words.

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