An Increase in the Price of a Resource Such as Oil

question 230

Multiple Choice

An increase in the price of a resource such as oil
I. shifts the aggregate demand curve leftward.
II. shifts the long-run aggregate supply curve rightward.
III. shifts the short-run aggregate supply curve leftward.
IV. increases the price level and decreases real GDP in the short run.

• A) Only I is correct.
• B) Only III is correct.
• C) Both III and IV are correct.
• D) Both I and II are correct.

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Definitions:

Factor Market

A marketplace for the services of a factor of production, such as labor, capital, or land.

Labor

Human effort, whether physical or mental, used in the production of goods and services.

Circular-Flow Diagram

A pictorial scheme of the economy, focusing on the exchange of dollars between households and firms through the market system.

Product Market

The marketplace where final goods or services are traded between sellers and consumers.