What impact will a permanent 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 decrease real output in both the short run and the long run.
C)It will decrease real output in the short run but not the long run.
D)It will increase real output in the short run but not in the long run.

Question

Quizplus · Accepted Answer

A permanent increase in the supply of a major input will reduce the cost of producing goods and services that use this input, leading to an increase in supply and a decrease in price. As a result, firms will produce more output at a lower cost, which increases real output in both the short and the long run. This will also lead to an increase in economic growth and productivity over time.

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