Which of the following changes best represents the effect of the oil embargo (a shut-off of oil from certain OPEC countries)of the 1970s on the U.S.?
A)A leftward shift of the long-run aggregate supply curve
B)A rightward shift of the long-run aggregate supply curve
C)A leftward shift of the aggregate demand curve
D)A rightward shift of the aggregate demand curve
E)A rightward movement along a given aggregate demand curve

Question

Quizplus · Accepted Answer

The oil embargo of the 1970s led to a decrease in the availability of oil, a critical input for production, resulting in higher production costs and a reduction in the productive capacity of the economy. This is represented by a leftward shift of the long-run aggregate supply curve.

Which of the Following Changes Best Represents the Effect of the Oil