An increase in the price of oil should:
A)Shift the dynamic aggregate demand curve to the right
B)Reduce the level of potential output
C)Shift the short-run aggregate supply curve upward
D)Create a temporary expansionary gap

Question

Quizplus · Accepted Answer

An increase in the price of oil would increase the cost of production for businesses, leading to a decrease in profitability and a reduction in output, causing the short-run aggregate supply curve to shift upward.

An Increase in the Price of Oil Should