In the AD-AS model with an upward-sloping AS-curve, a decrease in oil prices will
A)increase prices and output
B)decrease prices and increase output
C)increase prices and decrease output
D)decrease prices and output
E)decrease prices but have no effect on output

Question

Quizplus · Accepted Answer

A decrease in oil prices will shift the AS curve to the right, leading to a decrease in prices and an increase in output. This is because a decrease in oil prices lowers production costs for firms, allowing them to produce more at lower prices.

In the AD-AS Model with an Upward-Sloping AS-Curve, a Decrease