Which of the following shifts the short-run aggregate supply curve?Group of answer choicesa change in the price levela change in the price of oila change in short-run aggregate demandAll of these
Question
Which of the following shifts the short-run aggregate supply curve?Group of answer choicesa change in the price levela change in the price of oila change in short-run aggregate demandAll of these
Solution 1
The short-run aggregate supply curve can be shifted by several factors, including changes in resource prices, changes in potential output, and changes in expectations.
a) A change in the price level: This does not shift the short-run aggregate supply curve. The price level is represented on the vertical axis of the graph where the short-run aggregate supply curve is plotted. Therefore, a change in the price level results in a movement along the short-run aggregate supply curve, not a shift of the curve.
b) A change in the price of oil: This can shift the short-run aggregate supply curve. Oil is a key input in production for many goods and services. Therefore, a change in the price of oil can affect the cost of production for firms, which can cause the short-run aggregate supply curve to shift. If the price of oil rises, the cost of production increases and the short-run aggregate supply curve shifts to the left. If the price of oil falls, the cost of production decreases and the short-run aggregate supply curve shifts to the right.
c) A change in short-run aggregate demand: This does not shift the short-run aggregate supply curve. Changes in aggregate demand cause movements along the short-run aggregate supply curve, not shifts of the curve.
So, out of the given options, only a change in the price of oil can shift the short-run aggregate supply curve.
Solution 2
The short-run aggregate supply curve can be shifted by several factors, including changes in resource prices, changes in potential output, and changes in expectations.
a) A change in the price level: This does not shift the short-run aggregate supply curve. The price level is represented on the vertical axis of the graph where the short-run aggregate supply curve is plotted. Therefore, a change in the price level results in a movement along the short-run aggregate supply curve, not a shift of the curve.
b) A change in the price of oil: This can shift the short-run aggregate supply curve. Oil is a key input in production for many goods and services. Therefore, a change in the price of oil can affect the cost of production for firms, which can cause the short-run aggregate supply curve to shift. If the price of oil rises, the cost of production increases and the short-run aggregate supply curve shifts to the left. If the price of oil falls, the cost of production decreases and the short-run aggregate supply curve shifts to the right.
c) A change in short-run aggregate demand: This does not shift the short-run aggregate supply curve. Changes in aggregate demand cause movements along the short-run aggregate supply curve, not shifts of the curve.
So, out of the given options, only a change in the price of oil can shift the short-run aggregate supply curve.
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