The discovery of new iron ore fields will cause
A) the long-run aggregate supply curve to shift to the right and the short-run aggregate supply curve to shift to the left.
B) the long-run aggregate supply curve to shift to the right, but not the short-run aggregate supply.
C) the short-run aggregate supply curve to shift to the right, but not the long-run aggregate supply curve.
D) both the long-run and the short-run aggregate supply curves to shift to the right.

Question

Quizplus · Accepted Answer

The discovery of new iron ore fields will increase the availability of inputs for production, which would cause both the long-run and short-run aggregate supply curves to shift to the right. This is because there is an increase in potential output in the long-run due to the ability of firms to fully adjust their production inputs, and in the short-run due to the ability of firms to increase their temporary usage of inputs. Thus, option D is the correct choice.

The Discovery of New Iron Ore Fields Will Cause