Final answer:
An increase in oil prices impacts short-run aggregate supply, unemployment, and wages.
Explanation:
An increase in the price of oil, a crucial input in production, will have short-run consequences:
- Decreasing short-run aggregate supply: Higher oil prices increase production costs, leading to a reduction in short-run aggregate supply as shown in the example of SRAS₁ shifting leftward to SRAS₂.
- Decreasing unemployment: The increase in production costs may lead to lower output and potentially result in increased unemployment.
- Increasing real wages: As costs rise due to higher oil prices, firms may adjust by increasing wages to maintain workforce stability.
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