If a war interrupted oil production,which of the following would most likely happen in the short run?
A) Unit costs would decrease and there would be an upward movement along the aggregate supply curve.
B) Unit costs would increase and the aggregate supply curve would shift upward.
C) Unit costs would increase and the aggregate supply curve would shift downward.
D) Unit costs would decrease and the aggregate supply curve would shift upward.
E) Unit costs would increase and there would be movement along the aggregate supply curve.

Question

Quizplus · Accepted Answer

If a war interrupted oil production, the shortage of oil would increase the cost of producing goods and services, causing unit costs to increase. As a result, the aggregate supply curve would shift upward, indicating a decrease in the economy's potential output. This scenario represents a negative supply shock, which leads to stagflation (high inflation and low economic growth).

If a War Interrupted Oil Production,which of the Following Would