A decrease in a nation's level of capital would cause the _______ aggregate supply curve to shift to the _______.
A) long-run; right
B) long-run; left
C) short-run; right
D) None of these shifts would occur.

Question

Quizplus · Accepted Answer

A decrease in a nation's level of capital would cause a decrease in productivity, leading to an increase in costs of production. This shift in costs would cause the long-run aggregate supply curve to shift to the left. The short-run aggregate supply curve may also shift to the left, depending on the extent of the capital decrease and how quickly firms can adjust their production processes.

A Decrease in a Nation's Level of Capital Would Cause