Suppose an Increase in Oil Prices Is Accompanied by a Decline

Multiple Choice

Suppose an increase in oil prices is accompanied by a decline in the level of potential output.Which of the following is the most likely long-run effect?

A) real GDP will decrease but prices will increase
B) real GDP and prices will both decline
C) real GDP will remain the same but prices will increase
D) real GDP will remain the same but nominal GDP will decrease
E) the unemployment rate and prices will both decrease