AP® Environmental Science

Free Version

Upgrade subject to access all content

Easy

AS Shift Left

MACRO-GJMQ8M

Assume an economy is in equilibrium at its natural rate of output and only a fraction of the firms in the economy have fixed prices. Assume there is a temporary spike in the price of oil (which is a major input in this particular economy’s production process).

As a result of this shock the price level in the economy will

while output will

in the short run.