Question

Which statement explains how a large increase in the price of gasoline would affect a country's economy?

А
Prices would become unstable and create money illusion.
B
Prices would become stable and allow consumers to buy more.
С
Prices would become stable and permit banks to raise interest rates.
D
Prices would become unstable and erode the value of money and savings.

Answer 1

D . Prices would become unstable and erode the value of money and savings.

Step-by-step explanation:

An increase in the price of gasoline directly affects the economy of a country. Gasoline price increases and it increases inflation and reduces the economic growth of the country.

Inflation is defined as the condition at which price of a good increases at a time period that result into drop in the power of money.

Increase in oil price affect price of other things such as manufacturing and transportation which further affects price of other goods and services. So, increase in gasoline price affects other goods and service prices and erode the value of money and savings.

Hence, the correct answer is "D . Prices would become unstable and erode the value of money and savings."