An increase in oil prices is considered a supply shock because it would lead to a shift of the aggregate supply curve.

Name: An increase in oil prices is considered a supply shock because it would lead to a shift of the aggregate supply curve.
Brand: Quizplus
Rating: 5.0 (47 reviews)

Question

Quizplus · Accepted Answer

An increase in oil prices would increase the cost of production for many companies, leading to a decrease in their willingness to produce goods and services, which would result in a leftward shift of the aggregate supply curve. This is considered a supply shock.

An Increase in Oil Prices Is Considered a Supply Shock