Asked by Brandon Pimentel on May 12, 2024
Verified
Suppose an economy is initially in equilibrium and there is a sudden increase in oil prices.Which of the following is the most likely result?
A) Growth in real GDP
B) Price stability
C) Full employment output
D) Stagflation
E) Deflation
Stagflation
A situation in an economy where the inflation rate is high, economic growth rate slows, and unemployment remains steadily high.
Oil Prices
The cost per barrel of crude oil as determined by global supply and demand factors.
- Pinpoint the determinants of economic cycles and the impact of public policies in adjusting to these cycles.
- Investigate the connection between governmental actions and economic measures including employment rates, inflation levels, and real GDP.
Verified Answer
YB
Yarvnis BlogsMay 15, 2024
Final Answer :
D
Explanation :
A sudden increase in oil prices can lead to an increase in production costs, leading to a decrease in aggregate supply. This can result in a stagnant economy with high inflation rates, known as stagflation. Therefore, the most likely result is D.
Learning Objectives
- Pinpoint the determinants of economic cycles and the impact of public policies in adjusting to these cycles.
- Investigate the connection between governmental actions and economic measures including employment rates, inflation levels, and real GDP.