According to the AD-AS model,the short-run impact of a temporary drop in oil prices is __________;output ___________ and the price level ___________.

Question

Quizplus · Accepted Answer

According to the AD-AS model, a temporary drop in oil prices would lead to a decrease in production costs for firms, which would cause the short-run aggregate supply (SRAS) curve to shift to the right. As a result, output would increase and the price level would decrease. This is known as a positive supply shock. Option A is incorrect because the price level would decrease, not increase. Option B is incorrect because output would increase, not decrease. Option D and E are incorrect because a decrease in oil prices would lead to a positive supply shock in the short run.

According to the AD-AS Model,the Short-Run Impact of a Temporary