During the 1970s, some countries stopped oil sales to the United States. As petroleum prices rose
A) both aggregate supply and the aggregate price level fell.
B) both aggregate demand and the aggregate price level fell.
C) aggregate supply fell, and the aggregate price level rose.
D) both aggregate demand and the aggregate price level rose.

Question

Quizplus · Accepted Answer

With the decrease in oil sales, aggregate supply fell, resulting in a decrease in the amount of output available in the economy. This caused the aggregate price level to rise as the cost of production increased. However, aggregate demand was not directly affected by the oil embargo, so it did not necessarily fall.

During the 1970s, Some Countries Stopped Oil Sales to the United