Consider the basic AD/AS macro model.A rise in an input price like the price of oil would be expected to cause a new macroeconomic equilibrium in which the price level
A)and real GDP are higher than in the initial equilibrium.
B)and real GDP are lower than in the initial equilibrium.
C)is lower and real GDP higher than in the initial equilibrium.
D)is higher and real GDP remained the same as in the initial equilibrium.
E)is higher and real GDP lower than in the initial equilibrium.

Question

Quizplus · Accepted Answer

A rise in an input price, such as the price of oil, would shift the aggregate supply curve to the left, leading to a higher price level and lower real GDP in the new equilibrium.

Consider the Basic AD/AS Macro Model