An increase in the price of oil will cause which of the following in the medium run?
A)no change in the level of output
B)no change in the price level
C)an increase in the unemployment rate
D)a reduction in the interest rate
E) none of the above

Question

Quizplus · Accepted Answer

An increase in the price of oil will lead to higher production costs for firms, which will cause a decrease in the supply of goods and services. As a result, firms may reduce output and employment in the short run. However, in the medium run, prices may adjust to the new levels of production costs, leading to a decrease in the unemployment rate. Therefore, choice C is the most accurate answer. The other options are unlikely to occur in response to an increase in oil prices.

An Increase in the Price of Oil Will Cause Which