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True or False. If the price of oil suddenly increases by a large amount, AS will shift left, but the price level will not rise thanks to price inflexibility.

User Max Brodin
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16 votes
16 votes

False.

If the price of oil suddenly increases by a large amount, it is likely that the aggregate supply curve (AS) will shift left, indicating that there is less supply of goods and services available at each price level. This shift in the AS curve would lead to an increase in the overall price level, as there is now less supply available to meet the same level of demand. Price inflexibility, or the inability of prices to adjust quickly to changes in supply and demand, may cause the price level to rise more slowly than it otherwise would, but it is not likely to prevent the price level from rising altogether.

User Fangming
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