The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is true of the United Kingdom's experience?
A)The increase in the price of oil immediately shifted the AS curve to the left.
B)The financial crisis did not take hold right away so the AD curve did not immediately shift.
C)Eventually,the Lehman Brothers bankruptcy caused a negative demand shock leading to a further fall in output and an increase in the unemployment rate.
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The statement in option A is true as an increase in the price of oil is likely to lead to a decrease in aggregate supply. Option B is also true as the financial crisis did not immediately affect the UK economy. Option C is also true as the bankruptcy of Lehman Brothers led to a negative demand shock, which resulted in a decrease in output and an increase in the unemployment rate. Therefore, all of the above statements are correct, making option D the correct answer.

The Price of a Barrel of Oil Doubled Between 2007