Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico.This subsequently drove up natural gas,gasoline,and heating oil prices.As a result,this should
A)shift the short-run aggregate supply curve to the left.
B)shift the short-run aggregate supply curve to the right.
C)move the economy up along a stationary short-run aggregate supply curve.
D)move the economy down along a stationary short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

The destruction of oil refining capacity will increase the costs of production due to the increased input costs of gasoline and heating oil. This will shift the short-run aggregate supply curve to the left, decreasing output and increasing price levels.

Hurricane Katrina Destroyed Oil and Natural Gas Refining Capacity in the Gulf