If there is a sharp increase in oil prices, in the short run
A)consumption and investment will fall.
B)consumption will fall, investment will increase, and net exports will fall.
C)consumption, investment, and net exports will stay constant.
D)consumption will fall while investment and net exports will stay constant.
E)consumption will fall, net exports will increase, and investment will stay constant.

Question

Quizplus · Accepted Answer

A sharp increase in oil prices will increase the cost of production for many firms, leading to a decrease in supply and a shift of the aggregate supply curve to the left. As a result, prices will rise and consumption and investment will fall due to increased costs and reduced profits. Therefore, choice A is the best answer.

If There Is a Sharp Increase in Oil Prices, in the Short