In 1972 and the first three quarters of 1973, the European economy was in long-run equilibrium. Between October 1973 and March 1974, oil prices in international markets almost quadrupled. For an oil-importing economy like Europe, this caused a major increase in the cost of production (which meant a reduction in production capacity). As in 2020, many workers in Europe lost their jobs and the real incomes of the continent's households, taken as a whole, declined. However, unlike the situation in 2020, Europe's inflation in 1974 rose sharply. These observations imply that in 1974 Europe had experienced

a. an adverse supply shock combined with an adverse demand shock of greater magnitude.

b. an adverse demand shock combined with an adverse supply shock of greater magnitude.

c. an adverse demand shock combined with a favorable supply shock of greater magnitude.

d. a favorable supply shock combined with a favorable demand shock of greater magnitude.

e. a favorable demand shock combined with a favorable supply shock of greater magnitude.