An increase in the quantity of capital in the economy shifts both the short-run and long-run aggregate supply curves.

Question

Quizplus · Accepted Answer

An increase in the quantity of capital in the economy can lead to an increase in productivity, which shifts the short-run aggregate supply curve to the right, indicating that the economy can produce more output at the same price level. In the long run, the increase in capital can also lead to increases in potential output and productive capacity, which shifts the long-run aggregate supply curve to the right.

An Increase in the Quantity of Capital in the Economy