A Large Increase in Oil Prices Is an Example Of

question 88

Multiple Choice

A large increase in oil prices is an example of:

• A)a positive inflation shock.
• B)a negative inflation shock.
• C)inflation inertia.
• D)excessive aggregate spending.

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Definitions:

Capital Stock

The total amount of physical, financial, and human capital available in an economy, used to produce goods and services.

Gross Investment

The total amount of investment spent on new fixed investment plus replacement investment, without accounting for depreciation.

Net Investment

The total amount invested in buying new capital and replacing depreciated capital within a specific period.

Potential Output

The highest level of real GDP that can be sustained over the long term without increasing inflation, reflecting the maximum productive capacity of an economy.