Assume the economy is at long run equilibrium and oil prices rise.As a result,the ________ shifts ________.
A) AD; rightward
B) AD; leftward
C) SAS; rightward
D) SAS; leftward

Question

Quizplus · Accepted Answer

An increase in oil prices would lead to an increase in the cost of production for firms, causing a decrease in aggregate supply (SAS) and shifting the curve leftward. There would be no immediate effect on the aggregate demand (AD) curve.

Assume the Economy Is at Long Run Equilibrium and Oil