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 the price and output levels.

Question

Quizplus · Accepted Answer

A decrease in the stock of capital will lead to a decrease in the productive capacity of an economy, which will shift the long-run aggregate supply curve to the left. This will result in higher prices and lower output levels in the long run.

The Main Effect of a Decrease in the Stock of Capital