In the short run, the most important consequence of an increase in investment is a(n)

Question

Quizplus · Accepted Answer

An increase in investment leads to an increase in the capital stock in the long run, but in the short run, it leads to an increase in aggregate demand. This is because investment is one of the components of aggregate demand and an increase in investment leads to an increase in production and income, which in turn increases consumer spending. This increase in spending leads to an overall increase in aggregate demand.

In the Short Run, the Most Important Consequence of an Increase