If there is an increase in the price of oil, then
A)unemployment rises.If the central bank tries to counter this increase, inflation rises.
B)unemployment rises.If the central bank tries to counter this increase, inflation falls.
C)unemployment falls.If the central bank tries to counter this decrease, inflation falls.
D)unemployment falls.If the central bank tries to counter this decrease, inflation rises.

Question

Quizplus · Accepted Answer

An increase in the price of oil can lead to higher production costs for many businesses, potentially causing them to reduce their workforce, thus increasing unemployment. If the central bank attempts to counteract this by stimulating the economy (e.g., through lowering interest rates or increasing money supply), it can lead to higher inflation as more money chases the same amount of goods and services.

If There Is an Increase in the Price of Oil