Suppose there is a rather dramatic increase in the price of oil. What type of inflation might this create?
What impact could this have on the level of production and therefore the unemployment rate?
Answer:
The price of oil going up dramatically, would increase real prices across the board, because of transportion of products would greatly increase, and the fuels that are needed to produce products would increase.
Unemployment should rise as companies will not be able to afford as many employees.
Production levels should decrease as demand should also decrease.
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Answer:
The price of oil going up dramatically, would increase real prices across the board, because of transportion of products would greatly increase, and the fuels that are needed to produce products would increase.
Unemployment should rise as companies will not be able to afford as many employees.
Production levels should decrease as demand should also decrease.
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