The inflation associated with the oil embargoes of the 1970s resulted in:
A)reduced unemployment because aggregate demand increased.
B)reduced unemployment because aggregate demand fell.
C)increased unemployment because aggregate demand increased.
D)increased unemployment because aggregate demand fell.
E)increased unemployment because aggregate supply fell.

Question

Quizplus · Accepted Answer

The inflation associated with the oil embargoes of the 1970s resulted in increased unemployment because the embargoes led to a decrease in aggregate supply. The reduction in oil supply increased production costs, leading to stagflation, a combination of inflation and increased unemployment.

The Inflation Associated with the Oil Embargoes of the 1970s