A rapid increase in the price of oil will tend to
A)shift short-run aggregate supply to the left.
B)shift long-run aggregate supply to the left.
C)shift long-run aggregate supply to the right.
D)shift aggregate demand to the right.

Question

Quizplus · Accepted Answer

A rapid increase in the price of oil will increase production costs for firms, leading to a decrease in their profitability and a decrease in their willingness and ability to produce goods and services. This will lead to a decrease in short-run aggregate supply, shifting it to the left.

A Rapid Increase in the Price of Oil Will Tend