A large increase in oil prices is an example of
A) a downward inflation shock.
B) an upward inflation shock.
C) inflation inertia.
D) excessive aggregate demand.
E) a self-correcting tendency.

Question

Quizplus · Accepted Answer

An increase in oil prices typically leads to an increase in the prices of other goods and services, as businesses pass on the increased cost of production to consumers. This results in a general increase in prices across the economy, causing inflation to rise. Therefore, a large increase in oil prices is an example of an upward inflation shock.

A Large Increase in Oil Prices Is an Example of