Which of the following best describes the effect on the aggregate supply curve if political negotiations result in a substantial decrease in the price of oil?
A)The AS curve does not shift but there is an upward movement along it.
B)The AS curve does not shift but there is a downward movement along it.
C)The AS curve shifts rightward.
D)The AS curve shifts leftward.
E)There is no change to the AS curve.

Question

Quizplus · Accepted Answer

A decrease in the price of oil will lower firms' costs of production, leading to an increase in the quantity of goods and services they are willing to supply at any given price level. This results in a rightward shift of the aggregate supply curve.

Which of the Following Best Describes the Effect on the Aggregate