Question

For the scenario listed below, is there a shift in the long-run aggregate supply curve, the short-run aggregate supply curve, both, or neither? Explain your answer

Q: New shale gas deposits are found in North Dakota.

Answer 1

The discovery of new shale gas deposits in North Dakota would result in a shift in the short-run aggregate supply (SRAS) curve, indicating an increase in potential output.

Step-by-step explanation:

The discovery of new shale gas deposits in North Dakota would result in a shift in the short-run aggregate supply (SRAS) curve. When new shale gas deposits are found, the cost of production decreases, leading to lower input prices for businesses. This shift in the SRAS curve signifies an increase in potential output in the economy.