In the mid-1970s the price of oil rose dramatically. What did this event cause?
A)It shifted aggregate supply left.
B)It caused Canadian prices to fall.
C)The aggregate demand increased because of an increase in the demand for gasoline.
D)Nominal GDP increased.

Question

Quizplus · Accepted Answer

The increase in the price of oil caused a decrease in the amount of oil that firms could produce at any given price, which shifted the aggregate supply curve to the left. This led to higher prices and lower output, resulting in stagflation.

In the Mid-1970s the Price of Oil Rose Dramatically