Assume that the economy is at a 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

When oil prices rise, the cost of production for many goods and services increases. This leads to a decrease in the short-run aggregate supply (SAS) as producers are willing to supply less at the same price levels, hence the SAS curve shifts leftward.

Assume That the Economy Is at a Long Run Equilibrium