The long-run aggregate supply curve shifts left if
A)the capital stock increases.
B)there is a hurricane.
C)the government removes some environmental regulations that limit production methods.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

A leftward shift in the long-run aggregate supply curve indicates that the potential output of the economy has decreased. Natural disasters such as hurricanes can damage physical infrastructure and disrupt production processes, leading to a decrease in potential output and a leftward shift in the long-run aggregate supply curve. Increases in the capital stock and removal of environmental regulations that limit production methods are likely to increase potential output and shift the long-run aggregate supply curve to the right. Therefore, choices A and C are incorrect.

The Long-Run Aggregate Supply Curve Shifts Left If