In the long-run equilibrium, an increase in the quantity of capital leads to
A) a decrease in the equilibrium price level, but no change in equilibrium real GDP.
B) a decrease in the equilibrium price level and an increase in equilibrium real GDP.
C) no change in the equilibrium price level, but an increase in equilibrium real GDP.
D) an increase in the equilibrium price level and an increase in equilibrium real GDP.

Question

Quizplus · Accepted Answer

In the long-run, an increase in the quantity of capital shifts the long-run aggregate supply curve to the right, leading to a decrease in the equilibrium price level and an increase in equilibrium real GDP.

In the Long-Run Equilibrium, an Increase in the Quantity of Capital