What impact will a temporary increase in the supply of a major input have on real output?
A)It will increase real output in both the short run and the long run.
B)It will increase real output in the short run but not in the long run.
C)It will decrease real output in the short run but not the long run.
D)It will decrease real output in both the short run and the long run.

Question

Quizplus · Accepted Answer

A temporary increase in the supply of a major input will increase real output in the short run as firms are able to use more of the input and increase production. However, in the long run, firms may adjust their capital stock and technology to make more efficient use of the input, and the initial increase in real output may not be sustained.

What Impact Will a Temporary Increase in the Supply of a Major