An increase in the price of oil should cause the short-run aggregate supply curve to:
A) shift to the right.
B) become vertical.
C) become horizontal.
D) shift to the left.

Question

Quizplus · Accepted Answer

An increase in the price of oil would lead to an increase in production costs for firms, resulting in a decrease in their overall profitability. This would cause firms to reduce production levels, which would shift the short-run aggregate supply curve to the left.

An Increase in the Price of Oil Should Cause the Short-Run