A large reduction in oil prices will cause:
A) a rightward shift in the aggregate supply curve.
B) a rightward shift in the aggregate demand curve.
C) a leftward shift in the aggregate demand curve.
D) a leftward shift in the aggregate supply curve.

Question

Quizplus · Accepted Answer

A reduction in oil prices will reduce the costs of production for firms, which will lead to an increase in output and lower prices. This will result in a rightward shift in the aggregate supply curve.

A Large Reduction in Oil Prices Will Cause