An example of an negative inflation shock is:
A) an increase in interest rates.
B) an increase in government purchases.
C) a significant rise in oil prices.
D) a tax increase.

Question

Quizplus · Accepted Answer

A significant rise in oil prices can lead to an increase in the cost of production, which may result in higher prices of goods and services. This can contribute to inflationary pressure on the economy. Option A (an increase in interest rates) is not necessarily a negative inflation shock, as it can be used as a tool to control inflation. Option B (an increase in government purchases) may lead to increased demand but is not necessarily a negative inflation shock in and of itself. Option D (a tax increase) may impact consumption and demand but is not necessarily a negative inflation shock.

An Example of an Negative Inflation Shock Is