A-LevelEconomicsThe macroeconomy9708/12 · Oct/Nov 2010 · Q251 Mark
In Year 1 the price of a barrel of oil increased from $60 to $110. In Year 2 there was a further increase to $115 a barrel. Assume that oil price changes have an immediate impact on the general level of prices. What will be the effect of the changes in the oil price on a country's Consumer Price Index and on its inflation rate in Year 2 compared with Year 1?
Aeffect on the Consumer Price Index: decrease; effect on the rate of inflation: decrease
Beffect on the Consumer Price Index: decrease; effect on the rate of inflation: increase
Ceffect on the Consumer Price Index: increase; effect on the rate of inflation: decrease
Deffect on the Consumer Price Index: increase; effect on the rate of inflation: increase
✓ Correct answer
C: effect on the Consumer Price Index: increase; effect on the rate of inflation: decrease
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