Which of the following represents the short- run effects of an increase in the price of oil?
A) An increase in the interest rate.
B) A decrease in output.
C) An increase in the price level.
D) An increase in unemployment.
E) All of the above.

Question

Quizplus · Accepted Answer

An increase in the price of oil can lead to higher production costs for many businesses, which can contribute to inflation (an increase in the price level). This can prompt central banks to raise interest rates to combat inflation. Higher costs can also lead to reduced output as businesses cut back on production, and this reduction in output can lead to higher unemployment as businesses need fewer workers.

Which of the Following Represents the Short- Run Effects of an Increase