A reduction the amount of oil (a resource) will tend to cause which of the following?
A) a reduction in output and a reduction in the price level
B) a reduction in output with no change in the price level
C) a reduction in output and an increase in the price level
D) an increase in the price level and no change in output if accompanied by an increase in the money supply

Question

Quizplus · Accepted Answer

A reduction in the amount of oil will lead to a reduction in the production capacity, which will lead to a reduction in output. Since there will be less oil available for consumption, the price of oil will increase. The increased cost of production will result in an increase in the price level of other goods and services in the economy.

A Reduction the Amount of Oil (A Resource) Will Tend