DQuestion 5 2 pts A company projected that oil prices will plummet to $15 per ba

Question

DQuestion 5 2 pts A company projected that oil prices will plummet to $15 per barrel (currently $55-$60 per barrel) in 2021. If this happens, what will happen to aggregate supply in 2021, and what will be the result to macroeconomic equilibrium? O SRAS will shift left, at macroeconomic equilibrium GDP will decrease and price level will increase SRAS will shift right, at macroeconomic equilibrium GDP will stay the same and price level will decrease. SRAS will shift right, at macroeconomic equilibrium GDP will increase and price level will decrease 0 SRAS will shift left, at macroeconomic equilibrium, GDP will stay the same and price level will increase

Explanation / Answer

Third option is correct.

Decrease in oil prices is a reduction in cost of production. When cost of production falls supply increases. So SRAS shifts to the right. Rightward shift increases output and sunder there is no change in aggregate demand price level falls.

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