How do changes in the price of oil affect economies?
A)They lead to recession and deflation
B)They do not contribute much to output fluctuations.
C)They change the economy principally by changing aggregate demand.
D)They may create both inflation and recession.

Question

Quizplus · Accepted Answer

Changes in oil prices can affect economies in both positive and negative ways. If the increase in oil prices is sudden and unexpected, it can lead to inflation as the cost of production increases, which can cause a recession. On the other hand, if the change in oil prices is gradual and predictable, it can have a positive effect on the economy by increasing investment in alternative and renewable energy sources. Therefore, it can create both inflation and recession.

How Do Changes in the Price of Oil Affect Economies