An increase in oil prices will shift the short-run aggregate supply curve
A)up and to the left, causing the level of current output to fall.
B)up and to the left, causing the level of current output to rise.
C)down and to the right, causing the level of current output to rise.
D)down and to the right, causing the level of current output to fall.

Question

Quizplus · Accepted Answer

An increase in oil prices raises production costs for many goods and services, leading to a decrease in the quantity of goods and services that businesses are willing to supply at any given price level. This is represented by a shift of the short-run aggregate supply curve up and to the left, which results in a lower level of current output.

An Increase in Oil Prices Will Shift the Short-Run Aggregate