The main effect of a decrease in the stock of capital is a(n)
A)rightward shift of the short-run aggregate supply curve
B)rightward shift of the aggregate demand curve
C)leftward shift of the long-run aggregate supply curve
D)leftward shift of the aggregate demand curve
E)increase in price and output levels

Question

Quizplus · Accepted Answer

A decrease in the stock of capital would reduce the productivity of workers, leading to a leftward shift of the long-run aggregate supply curve, which represents the economy's potential output. This would result in a decrease in both output and price levels in the long run.

The Main Effect of a Decrease in the Stock of Capital