If the price of oil rises, the
A)AD curve and the AS curve shift rightward, the price level rises, and real GDP decreases.
B)AS curve shifts leftward, the price level rises, and real GDP decreases.
C)AS curve shifts leftward, the price level rises, and real GDP increases.
D)AD curve and the AS curve shift leftward, real GDP decreases, and the price level rises.
E)AD curve shifts rightward, real GDP increases, and the price level rises.

Question

Quizplus · Accepted Answer

When the price of oil rises, it increases production costs, causing the Aggregate Supply (AS) curve to shift leftward. This leads to a higher price level and a decrease in real GDP.

If the Price of Oil Rises, the