If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run,the economy would experience
A)stagflation.
B)long-run economic decline.
C)hyperinflation.
D)an increase in the natural rate of unemployment.

Question

Quizplus · Accepted Answer

A rapid increase in oil prices would lead to a rise in production costs, causing a supply shock in the economy. This results in stagflation, where there is a combination of high inflation and a decline in real GDP.

If Rapid Increases in Oil Prices Caused Price Levels to Increase