Each of the panels given below represents the short-run equilibrium in the U.S. economy. The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes.
Figure 8.1

-Refer to Figure 8.1. Which of the graphs in the figure best describes the impact of an effective oil embargo that raises the price of gasoline?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
E) Panel E

Question

Each of the panels given below represents the short-run equilibrium in the U.S. economy. The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes.
Figure 8.1
 
-Refer to Figure 8.1. Which of the graphs in the figure best describes the impact of an effective oil embargo that raises the price of gasoline?
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
E) Panel E

Quizplus · Accepted Answer

An oil embargo that raises the price of gasoline would shift the short-run Aggregate Supply curve to the left due to higher production costs. This would result in a higher price level and lower real output. Panel B shows a leftward shift of the short-run Aggregate Supply curve and an increase in the price level.

Each of the Panels Given Below Represents the Short-Run Equilibrium