Oil shocks tend to cause the price level to ______, and the real GDP to ______.

Question

Quizplus · Accepted Answer

Oil shocks, such as sudden increases in oil prices, typically lead to a decrease in real GDP due to increased production costs for businesses and reduced purchasing power for consumers. This decrease in real GDP is often accompanied by an increase in the overall price level as businesses pass on higher costs to consumers. Therefore, the best choice is B, which indicates that the price level increases and real GDP decreases.

Oil Shocks Tend to Cause the Price Level to ______