A sharp increase in oil prices along with a decline in labor productivity decline will likely shift the:
A)short-run aggregate supply curve up (to the left).
B)short-run aggregate supply curve down (to the right).
C)aggregate demand curve to the right.
D)aggregate demand curve to the left.

Question

Quizplus · Accepted Answer

A sharp increase in oil prices would increase production costs for many businesses, leading to a decrease in the quantity of goods and services supplied at any given price level, which is represented by a leftward shift (up) of the short-run aggregate supply curve. A decline in labor productivity would further decrease the quantity of goods and services produced, reinforcing the leftward shift of the short-run aggregate supply curve.

A Sharp Increase in Oil Prices Along with a Decline