An increase in oil prices to a country that is a net importer of oil shifts
A)both the short-run aggregate supply and long-run aggregate supply curves rightward.
B)both the short-run aggregate supply and long-run aggregate supply curves leftward.
C)the short-run aggregate supply curve leftward, but leaves the long-run aggregate supply curve unchanged.
D)the long-run aggregate supply curve rightward, but leaves the short-run aggregate supply curve unchanged.
E)the short-run aggregate supply curve leftward, but shifts the long-run aggregate supply curve rightward.

Question

Quizplus · Accepted Answer

An increase in oil prices leads to an increase in the costs of production for firms. As a result, the short-run aggregate supply curve shifts leftward, as firms are willing to supply less output at every price level. However, in the long run, firms can adjust their production and investment plans, and new firms can enter the market, leading to lower costs and increased production capacity. Therefore, the long-run aggregate supply curve remains unchanged.

An Increase in Oil Prices to a Country That Is