If a recession results from higher oil prices:
A)inflation should increase as output decreases.
B)inflation should fall as output falls.
C)output should not change but inflation should increase.
D)an expansionary gap should occur.

Question

Quizplus · Accepted Answer

Higher oil prices typically increase production costs for many businesses, resulting in decreased output and potentially higher prices for consumers. This decrease in output can lead to a rise in inflation as the supply of goods and services contracts.

If a Recession Results from Higher Oil Prices