The land of Mordor increases its capital stock. As a result, the long-run aggregate supply curve shifts ________ and so does the ________ curve.
A) rightward; aggregate demand
B) leftward; aggregate demand
C) rightward; short-run aggregate supply
D) leftward; short-run aggregate supply

Question

Quizplus · Accepted Answer

An increase in capital stock enhances a country's productive capacity, shifting the long-run aggregate supply (LRAS) curve rightward. This also affects the short-run aggregate supply (SRAS) curve, shifting it rightward, as the economy can produce more in the short term due to the increase in capital. The aggregate demand curve is not directly affected by changes in capital stock in this context.

The Land of Mordor Increases Its Capital Stock