If the U.S. government were to relax its restrictions on offshore oil well drilling in Alaska, the result to aggregate supply would be to
A) cause a shift in the SRAS to the left.
B) cause a shift in the LRAS to the left.
C) cause no long-term shifts in aggregate supply.
D) cause a shift in both LRAS and SRAS to the right.

Question

Quizplus · Accepted Answer

Allowing more offshore oil well drilling in Alaska would increase the availability of oil, which is a key factor of production. This would shift the LRAS to the right as potential output increases over the long-term. In the short-term, the increase in oil supply would also lower production costs, leading to a rightward shift of the SRAS. Therefore, the correct choice is D.

If the US Government Were to Relax Its Restrictions on Offshore Oil