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

Question

Quizplus · Accepted Answer

An increase in investment leads to an increase in the capital stock, which increases the economy's potential output in the long run. This shift in production capacity results in an outward shift of the long-run aggregate supply curve. Therefore, an increase in investment shifts the long-run aggregate supply curve, but it does not directly affect the other curves mentioned.

In the Long Run, an Increase in Investment Shifts ________Because