The price of a barrel of oil doubled between 2007 and the middle of 2008. To make matters worse,a financial crisis hit the U.S. economy starting in August of 2007. Which of the following is TRUE of the United Kingdom's experience?
A)The increase in the price of oil immediately shifted the AS curve to the left.
B)The financial crisis did not take hold right away so the AD curve did not immediately shift.
C)Eventually,the Lehman Brothers bankruptcy caused a negative demand shock leading to a further fall in output and an increase in the unemployment rate.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

All the statements accurately describe the economic impacts on the United Kingdom during that period. The increase in oil prices would have increased production costs, shifting the Aggregate Supply (AS) curve to the left. The financial crisis's effects on demand took time to materialize, delaying the shift in the Aggregate Demand (AD) curve. The Lehman Brothers bankruptcy in September 2008 was a significant event that exacerbated the financial crisis, leading to a negative demand shock, further reducing output and increasing unemployment.

The Price of a Barrel of Oil Doubled Between 2007