During 2008-2009, falling oil prices

Question

Quizplus · Accepted Answer

Falling oil prices would result in a decrease in production costs for Canadian firms, which would shift the short-run aggregate supply curve to the right. However, it is unlikely that this effect would be large enough to offset the negative impact on Canadian aggregate demand from reduced oil revenue and lower investment in the oil sector. Therefore, falling oil prices would lead to a leftward shift in the Canadian aggregate demand curve.

During 2008-2009, Falling Oil Prices