The main effect of an increase in capital stock is a(n):
A)rightward shift of the long-run aggregate supply curve.
B)rightward shift of the aggregate demand curve.
C)leftward shift of the long-run aggregate supply curve.
D)leftward shift of the aggregate demand curve.
E)increase in price and output levels.

Question

Quizplus · Accepted Answer

An increase in capital stock leads to an increase in potential output. This increase in potential output causes a rightward shift of the long-run aggregate supply curve. Therefore, the correct answer is A.

The Main Effect of an Increase in Capital Stock Is