After an Unexpected Increase in the Price of Oil, the Long-Run

question 99

Multiple Choice

After an unexpected increase in the price of oil, the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels.

• A)increases; increases
• B)increases; decreases
• C)decreases; increases
• D)decreases; decreases
• E)remains constant; increases

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Definitions:

Forbearance

Forbearance is the action of refraining from enforcing a right, obligation, or debt in a legal agreement, usually as an act of leniency by the creditor.

Sufficient Consideration

A legal concept indicating that the value exchanged in a contract is recognized as adequate, making the contract binding and enforceable.

Illusory Promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration.

Promissory Estoppel

A legal principle that prohibits a party from withdrawing a promise made to another party if the latter has relied on that promise to their detriment.