Toyota and Honda build additional plants in Canada.This event _______ short- run aggregate supply and _______ long- run aggregate supply.
A)does not change; does not change
B)increases; increases
C)does not change; increases
D)decreases; increases
E)increases; does not change

Question

Quizplus · Accepted Answer

Building additional plants increases the productive capacity of the economy, which increases both short-run and long-run aggregate supply. In the short run, it allows for more production due to increased capacity. In the long run, it reflects a higher potential output level.

Toyota and Honda Build Additional Plants in Canada