A Large Increase in Oil Prices Is an Example Of

question 50

Multiple Choice

A large increase in oil prices is an example of:

• A)a favorable inflation shock.
• B)an adverse inflation shock.
• C)inflation inertia.
• D)excessive aggregate spending.

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Definitions:

Second Welfare Theorem

An economic principle stating that under certain conditions, any efficient allocation of resources can be attained through a competitive equilibrium, assuming perfect markets and price flexibility.

Pareto Optimal

A distribution state of resources where trying to improve the status of one individual inevitably leads to the decline of another's.

Competitive Equilibrium

A state in a market-based economy where supply equals demand, and prices are stable, facilitating the optimal distribution of resources.

Contract Curve

In an Edgeworth Box diagram, the curve that represents all the Pareto efficient allocations between two consumers.