The inflation associated with the oil price shocks in the 1970s after OPEC restricted the supply of oil is an example of
A) cost-push inflation due to a supply shock.
B) cost-push inflation due to a demand shock.
C) demand-pull inflation due to a demand shock.
D) demand-pull inflation due to a supply shock.

Question

Quizplus · Accepted Answer

The restriction on oil supply by OPEC caused a decrease in aggregate supply, leading to an increase in prices. This is an example of cost-push inflation due to a supply shock.

The Inflation Associated with the Oil Price Shocks in the 1970s