Question

the graph above reflects a significant increase in world oil prices. what will the impact on aggregate supply most likely lead to?

Answer 1

Since the graph reflects a significant increase in world oil prices, the impact on aggregate supply will result in an increase in input prices.

It should be noted that an increase in the prices of oil will affect the aggregate supply. The aggregate supply simply means the total supply of goods and services that are produced in an economy at a particular period.

The impact on aggregate supply most likely leads to an increase in the prices of inputs. Since there's a rise in prices of world oil, it'll lead to inflation and hence result in an increase in input prices.

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