A temporary decrease in the price of oil will shift the short run aggregate supply curve right but not shift the long run aggregate supply curve.

Question

Quizplus · Accepted Answer

A temporary decrease in the price of oil will increase the profitability of firms, leading to an increase in production in the short run, which shifts the SRAS curve right. However, in the long run, prices and wages adjust, leading to a new equilibrium level of output and prices, and the LAS curve remains unchanged.

A Temporary Decrease in the Price of Oil Will Shift