In the 1950s, Michael Hubert King, an oil geologist, mathematically determined that when 50 percent of oil reserves have been extracted, annual oil output would inexorably decline. He looked at the rate of oil discovery in the United States and predicted that domestic oil production would peak in 1969. The peak occurred in 1970! Today global oil production is nearly at maximum production capacity, and it is likely that in the very near future the inexorable decline will begin globally.

a. Use the AS/AD model and the production possibility curve to describe what will happen when oil production declines.

b. What will this do to the question of "distribution," both within and between nations? (Institutionalist)