Question

Determine whether the supply of resources increases would cause a shift of the aggregate demand curve a shift of the aggregate supply curve neither or both. Which curve shift in which direction? What happened to the aggregate output and the price level in each case?

Answer 1

An increase in the resources will make the resources cheaper in the market and at a cheaper rate the production process that uses the resources will become cheaper too. This will shift the supply curve to the right and the new equilibrium in the market will be at a lower price and higher quantity in the market.

It will not affect the demand in the market but will only increase the supply. The new equilibrium in the market will be at a lower price and higher quantity available and the supply curve will shift in the right side.