New Oil reserves have been discovered in Country A. This will have the following effect?

Question

anonymous · Answer

what are the options?!

anonymous · Answer

@meganwellman98 I think we need more options.  A couple things I could think of...it could be shifting the PPF/PPC outward or it could be increasing supply.

anonymous · Answer

Oil is a resource right- firms use it in the production process to make goods and services. If  it was newly discovered then doesn't the amount of resources available increase? This leads to two things, a reduction in inflation to show the excess capacity created or economic growth  as the potential GDP level of the economy has largened. In other words, the LRAS curve shifts to the right.