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
E)remains constant; falls

Question

Quizplus · Accepted Answer

When the price of oil falls unexpectedly, it generally leads to lower production costs for many goods and services, which can cause the equilibrium price level to fall. Lower costs can also lead to increased production, which can reduce the unemployment rate in the short run as firms may hire more workers to increase output.

When the Price of Oil Falls Unexpectedly, the Equilibrium Price