An example of an upward inflation shock is
A) an increase in interest rates.
B) an increase in government purchases.
C) a large tax cut.
D) a tax increase.
E) a significant rise in oil prices.

Question

Quizplus · Accepted Answer

A significant rise in oil prices can lead to an upward inflation shock because it increases the cost of production for many goods and services, which leads to higher prices for consumers. As the cost of production increases, firms may try to pass on the cost to consumers in the form of higher prices, leading to inflationary pressures in the economy.

An Example of an Upward Inflation Shock Is