In the aggregate demand-aggregate supply model, everything else remaining unchanged, an increase in capital stock shifts the_____ to the_____ .
A)long-run aggregate supply; right
B)aggregate demand; right
C)short-run aggregate supply; left
D)aggregate demand; left

Question

Quizplus · Accepted Answer

An increase in capital stock will result in an increase in the productive capacity of an economy, leading to a shift in the long-run aggregate supply (LRAS) curve to the right. This will lead to an increase in the potential output of an economy, but will not necessarily affect the short-run aggregate supply (SRAS) or aggregate demand (AD) curves.

In the Aggregate Demand-Aggregate Supply Model, Everything Else Remaining Unchanged