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

Question

Quizplus · Accepted Answer

The construction of additional plants by Toyota and Honda in Canada will increase the production capacity of the economy in the long run, leading to an increase in long-run aggregate supply. In the short run, there might not be any immediate change in aggregate supply as it takes time for the new plants to start production.

Toyota and Honda Build Additional Plants in Canada