A crisis in the Middle East drastically raises the price of petroleum. If the aggregate demand curve does not shift, then aggregate supply will _{--------------------}, real GDP will_{--------------------} , and the price level will_{--------------------} . A)increase; increase; increase B)increase; remain the same; increase C)remain the same; increase; increase D)decrease; decrease; increase E)decrease; remain the same; decrease

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Quizplus · Accepted Answer

A crisis in the Middle East that raises petroleum prices would increase production costs, causing the aggregate supply to decrease. This would lead to a decrease in real GDP and an increase in the price level.

A Crisis in the Middle East Drastically Raises the Price