Which of the following shifts both the short-run and the long-run aggregate supply right?
A) an increase in government spending
B) an increase in the expected price level
C) an increase in the capital stock
D) an increase in interest rates

Question

Quizplus · Accepted Answer

An increase in the capital stock shifts both the short-run and long-run aggregate supply to the right. This is because an increase in the capital stock increases productive capacity and potential output in the economy, allowing firms to produce more goods and services at any given price level. Increases in government spending (A) and expected price level (B) only shift the short-run aggregate supply right, while an increase in interest rates (D) would actually shift both the short-run and long-run aggregate supply left, as it would decrease investment and economic growth.

Which of the Following Shifts Both the Short-Run and the Long-Run