If the price of oil rises,the
A)AD curve shifts rightward,real GDP increases,and the price level rises.
B)AS curve shifts leftward,the price level rises,and real GDP decreases.
C)AD curve and the AS curve shift leftward,real GDP decreases,and the price level rises.
D)AD curve and the AS curve shift rightward,the price level rises,and real GDP decreases.
E)AS curve shifts leftward,the price level rises,and real GDP increases.

Question

Quizplus · Accepted Answer

When the price of oil rises, it increases the cost of production for firms, leading to a decrease in aggregate supply (AS curve shifts leftward). This results in a decrease in real GDP and an increase in the price level. The AD curve does not shift because the increase in oil price does not affect aggregate demand directly.

If the Price of Oil Rises,the