Which of the following describes what would happen after an increase in oil prices?
A) A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual increase in the wage as employment increases,leading to a leftward shift of the aggregate supply curve
B) An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to a leftward shift of the aggregate supply curve
C) An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment decreases,leading to a rightward shift of the aggregate supply curve
D) A downward shift of the aggregate supply curve as unit costs decrease,followed by a gradual decrease in the wage as employment decreases,leading to a rightward shift of the aggregate supply curve
E) An upward shift of the aggregate supply curve as unit costs increase,followed by a gradual decrease in the wage as employment increases,leading to a rightward shift of the aggregate supply curve.

Question

Quizplus · Accepted Answer

An increase in oil prices would lead to an increase in unit costs, which would shift the aggregate supply curve upward. As employment decreases due to higher costs, wages would also decrease, leading to a further rightward shift of the aggregate supply curve.

Which of the Following Describes What Would Happen After an Increase