Multiple Choice
Which of the following is NOT typically considered a topic in macroeconomics?
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1. Introduction to Macroeconomics
Introduction to Economics
Multiple Choice
When OPEC raised the price of crude oil in the 1970s, it caused the:
A
aggregate demand curve to shift to the right, resulting in economic expansion
B
price level to fall as energy costs declined
C
unemployment rate to decrease due to increased oil production
D
aggregate supply curve to shift to the left, leading to higher inflation and unemployment
Verified step by step guidance1
Understand the economic context: When OPEC raised the price of crude oil, it increased production costs for many firms, especially those reliant on energy inputs.
Recall the difference between aggregate demand (AD) and aggregate supply (AS): AD represents total spending in the economy, while AS represents total production at different price levels.
Analyze the effect of higher oil prices on aggregate supply: Higher oil prices increase costs for producers, which reduces the quantity of goods and services supplied at any given price level, causing the aggregate supply curve to shift leftward.
Consider the macroeconomic consequences of a leftward shift in aggregate supply: This shift leads to higher overall price levels (inflation) and lower output, which can increase unemployment.
Conclude that the correct description is a leftward shift of the aggregate supply curve, resulting in higher inflation and unemployment, rather than changes in aggregate demand or falling prices.
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