Asked by Lizeth DeLaTorre on Jun 29, 2024
Verified
Suppose OPEC is unable to come to an agreement regarding oil production and as a result the price of oil drops. Which of the following would you expect to occur as a result of this favorable supply shock?
A) The short-run Phillips curve will shift to the right and the unemployment rate will increase.
B) The short-run Phillips curve will shift to the right and the unemployment rate will decrease.
C) The short-run Phillips curve will shift to the left and the unemployment rate will increase.
D) The short-run Phillips curve will shift to the left and the unemployment rate will decrease.
OPEC
The Organization of the Petroleum Exporting Countries, a group of oil-producing nations that aims to manage the supply of oil to stabilize oil market prices and ensure efficient, economic and regular supply to consumers.
Oil Production
The process of extracting crude oil from the earth and preparing it for sale, including exploration, drilling, and refining.
Favorable Supply Shock
An unexpected event that increases the supply of goods or services, typically leading to lower prices for those goods or services.
- Evaluate the outcomes of supply shocks on the economy’s performance, inflation, and the dynamics of the Phillips curve.
Verified Answer
Learning Objectives
- Evaluate the outcomes of supply shocks on the economy’s performance, inflation, and the dynamics of the Phillips curve.
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