When the price of oil falls unexpectedly,the equilibrium price level ________ and the unemployment rate ________ in the short run.
A) rises; falls
B) rises; rises
C) falls; falls
D) falls; rises

Question

Quizplus · Accepted Answer

When the price of oil falls unexpectedly, production costs decrease, leading to lower prices for goods and services (equilibrium price level falls) and increased production, which can reduce unemployment (unemployment rate falls) in the short run.

When the Price of Oil Falls Unexpectedly,the Equilibrium Price Level