A higher price for oil shifts the
A) SAS curve leftward.
B) LAS curve leftward.
C) AD curve rightward.
D) SAS curve rightward.

Question

Quizplus · Accepted Answer

When oil prices increase, production costs increase for industries that rely on oil, which shifts their short-run aggregate supply (SAS) curve leftward. This is because they face higher costs of production, leading to an increase in the price level for a given level of output. Therefore, choice A is the best option. Choices B and D are incorrect because the long-run aggregate supply (LAS) curve is unaffected by changes in prices and only shifts due to changes in technology or factors of production. Choice C is incorrect because an increase in oil prices would result in a decrease in aggregate demand (AD) due to the decrease in consumption and investment spending.

A Higher Price for Oil Shifts the