During the last half of 1999 and first quarter of 2000,the members of the Organization of Petroleum Exporting Countries (OPEC)negotiated reductions in the global production of oil.As a result,the price of heating oil and gasoline increased dramatically during that period.This led some analysts to predict an increase in the inflation rate in oil-consuming countries.Drawing such a conclusion results from confusing

Question

Quizplus · Accepted Answer

The increase in the price of heating oil and gasoline due to OPEC's negotiated reductions in global oil production results in a change in the relative price of the goods, not a change in the overall price level. Confusing these two concepts - a change in the relative price of a good with a change in the price level - leads to the prediction that the inflation rate will increase in oil-consuming countries, which is not necessarily true.

During the Last Half of 1999 and First Quarter of 2000,the