A new discovery of large volumes of previously unknown deposits of natural gas in Pennsylvania would
A)shift the short-run and long-run aggregate supply curves to the right.
B)shift only the short-run aggregate supply curve to the right.
C)shift only the long-run aggregate supply curve to the right.
D)not affect either the short-run or long-run aggregate supply curves.

Question

Quizplus · Accepted Answer

The discovery of large volumes of natural gas deposits in Pennsylvania would increase the supply of natural gas, which would reduce its market price. This would lower the production costs for firms that use natural gas as an input, which would increase their profitability and encourage them to produce more output. This would shift both the short-run and long-run aggregate supply curves to the right, as firms expand their production.

A New Discovery of Large Volumes of Previously Unknown Deposits