If a new method for obtaining oil from dry oil fields is found,then we will see:
A) the AS curve shift to the left.
B) a movement to the left along the AD curve.
C) the AD curve shift to the left.
D) the AD curve shift to the right.
E) the AS curve shift to the right.

Question

Quizplus · Accepted Answer

The discovery of a new method for obtaining oil from dry oil fields would increase the potential output of the economy, which would shift the AS curve to the right. This would lead to an increase in real GDP and a decrease in the price level, as shown by a movement along the AD curve to the right. Therefore, the correct choice is E, as it correctly describes the impact on the AS curve.

If a New Method for Obtaining Oil from Dry Oil