Refer to the information provided in Figure 26.6 below to answer the question(s) that follow. Figure 26.6
-Refer to Figure 26.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably
A) increase both the equilibrium output and the price level.
B) decrease the equilibrium output and increase the price level.
C) increase the equilibrium output and decrease the price level.
D) decrease both the equilibrium output and the price level.

Question

Refer to the information provided in Figure 26.6 below to answer the question(s) that follow.  Figure 26.6
-Refer to Figure 26.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably
A) increase both the equilibrium output and the price level. 
B) decrease the equilibrium output and increase the price level. 
C) increase the equilibrium output and decrease the price level. 
D) decrease both the equilibrium output and the price level.

Quizplus · Accepted Answer

An oil embargo would most likely cause a decrease in the aggregate supply of goods and services, leading to a leftward shift of the AS curve. This would result in a decrease in equilibrium output and an increase in the price level. Therefore, the correct choice is B.

Refer to the Information Provided in Figure 26