Suppose there is a sharp decline in oil prices. According to the theory of economic fluctuations,
A)real GDP will fall.
B)real GDP will not change.
C)its effect on real GDP is uncertain.
D)real GDP will increase.
E)potential GDP will fall.

Question

Quizplus · Accepted Answer

According to the theory of economic fluctuations, a sharp decline in oil prices will lead to a decrease in production costs for energy-dependent industries, resulting in increased profits and potentially increased investment and hiring. This should lead to an increase in real GDP.

Suppose There Is a Sharp Decline in Oil Prices