A one-time increase in the price of oil followed by a one-time increase in aggregate demand produces
A) continuing cost-push inflation.
B) continuing demand-pull inflation.
C) a one-time decrease in the price level.
D) a one-time increase in the price level.

Question

Quizplus · Accepted Answer

A one-time increase in the price of oil can initially lead to higher production costs for businesses, which might pass these costs onto consumers, leading to a one-time increase in the price level. Similarly, a one-time increase in aggregate demand can push prices up as well, but neither scenario inherently leads to a continuing inflationary process without further shocks or increases in demand or costs.

A One-Time Increase in the Price of Oil Followed by a One-Time