A new discovery of large volumes of previously unknown oil deposits in Texas 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 previously unknown oil deposits in Texas would increase the overall supply of oil in the market, thereby increasing the availability of factors of production in the economy, and shifting both the short-run and long-run aggregate supply curves to the right. This would lead to an increase in output and a decrease in prices in the short-run and a sustained increase in output over time in the long-run.

A New Discovery of Large Volumes of Previously Unknown Oil