11.3 The Final Equilibrium
Refer to the information provided in Figure 11.6 below to answer the questions that follow. Figure 11.6
-Refer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably
A) increase both the equilibrium output and the price level.
B) decrease the equilibrium output and increase the price level.
C) increase the equilibrium output and decrease the price level.
D) decrease both the equilibrium output and the price level.

Question

11.3 The Final Equilibrium
Refer to the information provided in Figure 11.6 below to answer the questions that follow.  Figure 11.6
-Refer to Figure 11.6. Suppose the equilibrium output is initially $600 billion. An oil embargo would probably
A) increase both the equilibrium output and the price level. 
B) decrease the equilibrium output and increase the price level. 
C) increase the equilibrium output and decrease the price level. 
D) decrease both the equilibrium output and the price level.

Quizplus · Accepted Answer

An oil embargo would reduce the supply of oil, increasing production costs for firms, leading to a decrease in aggregate supply which would decrease equilibrium output and increase the price level.

11.3 the Final Equilibrium