Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico which subsequently drove up natural gas,gasoline,and heating oil prices.Three years later,once the refining capacity was restored,these prices came back down.The restoration of refining capacity should

Question

Quizplus · Accepted Answer

The restoration of refining capacity would lead to an increase in the supply of natural gas, gasoline, and heating oil, thereby shifting the short-run aggregate supply curve to the right. This would result in lower prices and higher output levels.

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