Consider the Following News Headline: "World Commodity Prices Rise Sharply

Multiple Choice

Consider the following news headline: "World commodity prices rise sharply." Choose the statement below that best describes the likely macroeconomic effects in Canada.(Remember that Canada is both a producer and a consumer of commodities.)

A) There is no change in either the AD or the AS curves.
B) The AD curve shifts to the left and the AS curve shifts to the right; the price level falls and the effect on real GDP is indeterminate.
C) The AD and AS curves both shift to the left; the effect on the price level is indeterminate and real GDP decreases.
D) The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP increases.
E) The AD curve shifts to the right and the AS curve shifts to the left; the price level rises and the effect on real GDP is indeterminate.