In the mid-1970s, changes in oil prices greatly affected U.S. inflation. When oil prices rose, the U.S. would experience:
A) Cost-push inflation and rising output
B) Demand-pull inflation and rising output
C) Cost-push inflation and falling output
D) Demand-pull inflation and falling output

Question

Quizplus · Accepted Answer

When oil prices rose, it caused an increase in the cost of production for many industries. This, in turn, caused a decrease in the supply of goods and services, leading to a decrease in output. As a result, the U.S. experienced cost-push inflation and falling output during this period.

In the Mid-1970s, Changes in Oil Prices Greatly Affected U