In the early-1970s, changes in oil prices greatly affected U.S. inﬂation. When oil prices rose, the U.S. experienced
A) cost-push inﬂation and rising output.
B) demand-pull inﬂation and rising output.
C) cost-push inﬂation and falling output.
D) demand-pull inﬂation and falling output.

Question

Quizplus · Accepted Answer

When oil prices rise, the cost of production for many goods and services increases, leading to higher prices for consumers. This is known as cost-push inflation. Additionally, higher oil prices can lead to decreased economic activity, as consumers and businesses have less money to spend on other things. This can lead to falling output, or a decrease in the total amount of goods and services produced in the economy. Therefore, the correct answer is C.

In the Early-1970s, Changes in Oil Prices Greatly Affected U