Each of the panels given below represents the short-run equilibrium in the U.S.economy.The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes. Figure 8.1 Refer to Figure 8.1.Which of the graphs in the figure best describes the impact of an effective oil embargo that raises the price of gasoline?
A)Panel A
B)Panel B
C)Panel C
D)Panel D
E)Panel E

Question

Each of the panels given below represents the short-run equilibrium in the U.S.economy.The Aggregate Demand and Aggregate Supply curves in each panel responds to various economic changes. Figure 8.1  Refer to Figure 8.1.Which of the graphs in the figure best describes the impact of an effective oil embargo that raises the price of gasoline?
A)Panel A 
B)Panel B 
C)Panel C 
D)Panel D 
E)Panel E

Quizplus · Accepted Answer

An oil embargo that raises the price of gasoline would cause a leftward shift in the short-run aggregate supply curve, as the cost of production increases. This results in a higher equilibrium price level and lower equilibrium output. Panel B shows this scenario, with a shift in the short-run aggregate supply curve to the left, resulting in a higher price level and lower output.

Each of the Panels Given Below Represents the Short-Run Equilibrium