If investment as a fraction of GDP rose substantially and then stayed at a high level,what effect would this have on aggregate supply over time?
A)It will shift both the SRAS and LRAS right.
B)It will shift the SRAS right, but not the LRAS.
C)It will shift the LRAS to the left, but not the SRAS.
D)It will shift both the SRAS and the LRAS left.

Question

Quizplus · Accepted Answer

A rise in investment as a fraction of GDP indicates an increase in capital stock, leading to higher productivity and potential output in the long run. This would result in both short-run and long-run aggregate supply shifting to the right. Therefore, option A is the correct answer.

If Investment as a Fraction of GDP Rose Substantially and Then