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.
E)shift short-run aggregate supply to the right.

Question

Quizplus · Accepted Answer

A rapid increase in the price of oil will increase the cost of production for firms, leading to a decrease in their profitability and, in turn, cause them to reduce their output. Thus, it will shift the short-run aggregate supply curve to the left.

A Rapid Increase in the Price of Oil Will Tend