With an increase in the capital stock, the short-run aggregate supply curve
A) shifts rightward.
B) becomes steeper.
C) shifts leftward.
D) remains as it is.

Question

Quizplus · Accepted Answer

An increase in the capital stock will increase the productivity and efficiency of the economy. This leads to a lower cost of production for firms and an increase in the supply of goods and services. As a result, the short-run aggregate supply curve shifts rightward.

With an Increase in the Capital Stock, the Short-Run Aggregate