Suppose there is a temporary increase in the price of oil. This is represented by
A) a leftward shift of the SAS and the LAS curve.
B) a rightward shift of the SAS curve.
C) a leftward shift of the LAS curve.
D) a leftward shift of the SAS curve.

Question

Quizplus · Accepted Answer

An increase in the price of oil will increase the cost of production for firms and cause them to produce less output. This will result in a leftward shift of the SAS (short-run aggregate supply) curve. The LAS (long-run aggregate supply) curve will not be affected by a temporary increase in the price of oil.

Suppose There Is a Temporary Increase in the Price of Oil