If a large fraction of the capital stock in the U.S. stopped functioning, it would:
A)Shift the short run aggregate supply curve to the left.
B)Shift the long run aggregate supply curve to the left.
C)Shift both the short run aggregate supply curve and long run aggregate supply curves to the left.
D)Do none of the above

Question

If a large fraction of the capital stock in the U.S. stopped functioning, it would:
A)​Shift the short run aggregate supply curve to the left.
B)​Shift the long run aggregate supply curve to the left.
C)​Shift both the short run aggregate supply curve and long run aggregate supply curves to the left.
D)​Do none of the above

Quizplus · Accepted Answer

If a large fraction of the capital stock in the U.S. stopped functioning, it would cause a decrease in production capacity resulting in a decrease in the potential output. This would cause a leftward shift in both the short-run and long-run aggregate supply curves. As a result, prices would increase and output would decrease in the short run, and prices would increase even more in the long run as the economy adjusts to the new lower level of potential output.

If a Large Fraction of the Capital Stock in the U.S