The short-run aggregate supply curve has a positive slope, showing that increases in the price level will increase the quantity of aggregate output supplied by firms. -all factors of production increase. -all prices are flexible. -technological progress outpaces raises in nominal wages.
Suppose that oil prices increase sharply while the rate of growth in labor productivity declines. The combination of these two factors should shift the short-run aggregate supply curve to the left. increase per-unit production costs and shift the aggregate supply curve to the left.
Imports decrease and exports increase. This will cause the aggregate demand curve to The price level decreases. This will cause the aggregate demand curve to Consumption increases.
How does the cost of production, such as a high price of oil (or other energy price) matter in short run aggregate supply? Firms have to pay a higher cost of production due to the higher price of oil, which would lower unit profit.