A sharp increase in oil prices will result in
A)a deflation.
B)a decline in potential GDP.
C)stagflation.
D)disinflation.
E)hyperinflation.

Question

Quizplus · Accepted Answer

A sharp increase in oil prices can lead to stagflation, which is a combination of high inflation and low economic growth. When oil prices rise, the cost of producing goods and services increases, leading to higher prices for consumers. This can lead to inflation. At the same time, the higher cost of production can decrease the quantity of goods and services produced, leading to lower economic growth. This combination of high inflation and low economic growth is known as stagflation.

A Sharp Increase in Oil Prices Will Result in