A sudden increase in the price of oil causes a ________ inflation and ________ output.
A) demand-pull; lower
B) cost-push; higher
C) demand-pull; higher
D) cost-push; lower

Question

Quizplus · Accepted Answer

A sudden increase in the price of oil is an example of cost-push inflation, where production costs increase and businesses, in turn, increase their prices to maintain their profit margin. As a result, the overall output of the economy will decrease due to the higher production costs, leading to a decrease in supply.

A Sudden Increase in the Price of Oil Causes a ________