Which of the following will most likely increase aggregate supply in the long run?
A) unfavorable weather conditions in agricultural areas
B) an increase in the expected inflation rate
C) higher real interest rates
D) an increase in the rate of capital formation

Question

Quizplus · Accepted Answer

An increase in the rate of capital formation will lead to a higher level of physical capital per worker, which increases labor productivity and efficiency in production. As a result, firms will be able to produce more output with the same level of inputs, increasing aggregate supply in the long run. The other options either have no effect on aggregate supply or can even decrease it.

Which of the Following Will Most Likely Increase Aggregate Supply