The discovery of new oil deposits 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 oil deposits will increase the availability of a key input for many industries, which causes a decrease in production costs and an increase in output in the economy. Thus, both the short-run and long-run aggregate supply curves will shift to the right, resulting in a lower price level and higher real GDP.

The Discovery of New Oil Deposits Will Cause