By itself, an increase in the price of oil shifts the
A) short-run aggregate supply curve leftward and does not shift the aggregate demand curve.
B) short-run aggregate supply curve rightward and does not shift the aggregate demand curve.
C) aggregate demand curve leftward and does not shift the short-run aggregate supply curve.
D) aggregate demand curve rightward and does not shift the short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

An increase in the price of oil typically raises production costs for many companies, leading to a decrease in the overall quantity of goods and services that firms are willing to supply at any given price level. This scenario is represented by a leftward shift of the short-run aggregate supply curve, as it reflects a decrease in supply without directly affecting the aggregate demand curve.

By Itself, an Increase in the Price of Oil Shifts