The prices of oil, gasoline, and other petroleum products, which are key inputs in production, have been decre

The prices of oil, gasoline, and other petroleum products, which are key inputs in production, have been decreasing in recent months. Other things being equal, which of the following is likely to occur in the U.S. economy as a result of the decline in oil prices?


(a) An increase in the unemployment rate.


(b) A decrease in both equilibrium price level and equilibrium real GDP.


(c) A decrease in the equilibrium price level and an increase in equilibrium real GDP.


(d) An increase in both equilibrium price level and equilibrium real GDP.The prices of oil, gasoline, and other petroleum products, which are key inputs in production, have been decre
In relative terms, on an annual argument, WTI is trading at $99 on 11/20, compared to $56 11/20/06. Ouch!





So 'decreasing' is in comparison to what?





But to your question, I'd guess that (c) is the most likely - price levels will come down, and GDP will more than likely see some stimulation, and will increase, due to lower price of inputs.





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High 5