A temporary supply shock,such as an increase in oil prices,would
A)shift the IS curve down and leave the FE line unchanged.
B)shift the IS curve down and shift the FE line to the left.
C)shift the IS curve up but leave the FE line unchanged.
D)have no effect on the IS curve.

Question

Quizplus · Accepted Answer

A temporary supply shock, like an increase in oil prices, affects the supply side of the economy, not the demand side, so it does not shift the IS curve, which represents equilibrium in the goods market.

A Temporary Supply Shock,such as an Increase in Oil Prices,would