In the long run, an increase in investment shifts ________because of an increased capacity to produce.

Question

Quizplus · Accepted Answer

An increase in investment would increase the capital stock and technology, leading to higher productivity and potential output. This shifts the long-run aggregate supply curve to the right. An increase in investment does not directly affect the long-run aggregate demand curve or the investment demand curve. It may have some short-run impact on the short-run aggregate supply curve, but in the long run, the economy should adjust to the new potential output level.

In the Long Run, an Increase in Investment Shifts ________Because