In the events of an increase in the international price of oil that encouraged the central bank to accept lower real interest rates, inflation would most likely ?
Correct answer: B. increase
- A. fall
- B. increase
- C. remain the same
- D. fluctuates
Explanation
A rise in oil prices is an adverse supply shock, but accepting lower real interest rates is an expansionary monetary response that stimulates demand. This response tends to increase inflationary pressure.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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