By itself, an increase in the price of oil shifts the
A) aggregate demand curve leftward and does not shift the aggregate supply curve.
B) aggregate demand curve rightward and does not shift the aggregate supply curve.
C) aggregate supply curve rightward and does not shift the aggregate demand curve.
D) aggregate supply curve leftward and does not shift the aggregate demand curve.
E) aggregate demand curve rightward and shifts the potential GDP line rightward.

Question

Quizplus · Accepted Answer

An increase in the price of oil typically raises production costs for many goods and services, leading to a decrease in the quantity of goods and services supplied at any given price level. This scenario is represented by a leftward shift of the aggregate supply curve, without directly affecting the initial position of the aggregate demand curve.

By Itself, an Increase in the Price of Oil Shifts