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

Question

Quizplus · Accepted Answer

A temporary increase in the price of oil increases production costs, leading to a leftward shift of the Short-Run Aggregate Supply (SAS) curve, as firms reduce output at each price level. The Long-Run Aggregate Supply (LAS) curve remains unchanged because it is not affected by temporary price changes.

Suppose There Is a Temporary Increase in the Price of Oil