Scenario 35-1
Suppose that in the first half of June 2022, the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.
-Refer to Scenario 35-1. In the short run the increased prices of world commodities
A)raised both the price level and output.
B)raised the price level and reduced output.
C)reduced the price level and raised output.
D)reduced both the price level and output.

Question

Quizplus · Accepted Answer

In the short run, increased prices of world commodities, such as oil and foodstuffs, typically lead to higher overall price levels due to the increased costs of production and transportation. This, in turn, can reduce output as costs rise for businesses, leading to potential cutbacks in production and investment.

Scenario 35-1 Suppose That in the First Half of June 2022, the 2022