Other things being equal, a reorganization of the OPEC cartel to permit it to increase world oil prices by 70 percent would most likely have which effect?
A) It would shift the aggregate demand curve right.
B) It would shift the aggregate supply curve right.
C) It would shift the aggregate supply curve up.
D) It would shift the aggregate demand curve right and the aggregate supply curve up.

Question

Quizplus · Accepted Answer

An increase in world oil prices by 70 percent, due to a reorganization of the OPEC cartel, would most likely cause the cost of production for many goods and services to increase. This would decrease the quantity of goods and services supplied at any given price level, effectively shifting the aggregate supply curve up (or to the left in some interpretations), indicating a decrease in supply without a direct impact on the aggregate demand curve.

Other Things Being Equal, a Reorganization of the OPEC Cartel