-Refer to the above figure. Assume that B is the current long-run aggregate supply (LRAS) curve and that E is the current short-run aggregate supply (SRAS) curve. If a new discovery of large oil fields in Florida led to an increase in the nation's productive capacities, then we could expect the LRAS curve and the SRAS curve to
A) remain B and E.
B) move to A and D.
C) move to C and F.
D) move to A and F.

Question

-Refer to the above figure. Assume that B is the current long-run aggregate supply (LRAS) curve and that E is the current short-run aggregate supply (SRAS) curve. If a new discovery of large oil fields in Florida led to an increase in the nation's productive capacities, then we could expect the LRAS curve and the SRAS curve to
A) remain B and E. 
B) move to A and D. 
C) move to C and F. 
D) move to A and F.

Quizplus · Accepted Answer

The discovery of large oil fields would increase the nation's productive capacities, leading to an outward shift of both the Long-Run Aggregate Supply (LRAS) and Short-Run Aggregate Supply (SRAS) curves. This is because the economy can now produce more goods and services at every price level, reflecting an increase in potential output.

-Refer to the Above Figure