By itself, a fall 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

A fall in the price of oil typically decreases production costs for many companies, which can lead to an increase in the overall supply of goods and services in the economy. This is represented by a rightward shift of the short-run aggregate supply curve, as producers are willing and able to supply more at every price level. It does not directly affect the aggregate demand curve.

By Itself, a Fall in the Price of Oil Shifts