Question

Changes in the price of oil:

a) can only lead to recessions.
b) change the economy principally by changing aggregate demand.
c) created both inflation and recession in the United States in the 1970s.
d) have not contributed much to output fluctuations in the United States.

Answer 1

c) created both inflation and recession in the United States in the 1970s.

Step-by-step explanation:

the recession and inflation started from '72 and end up in the earlys '80 is considered the greatest failure of American macroeconomic policy in the postwar period.

It was the cause of 1973 oil crisis when the Arab countries made an oil embargo against nations perceived as supporters for israel. Amongs this nation was the USA, the UK and Canada. This make the oil price to rise up to 400% This situation made a market crash and then, US leave the gold standard Also, within this period, the industrial areas in the countries to re-structure to consume less oil as it was scarse

During the period about 3 million of jobs were lost and inflation made peak at 20% per year.