An increase in the amount of human capital ___________the short-run aggregate supply curve and___________ The long-run aggregate supply curve.
A) shifts; does not shift
B) shifts; shifts
C) does not shift; does not shift
D) does not shift; shifts

Question

Quizplus · Accepted Answer

An increase in the amount of human capital will shift the short-run aggregate supply curve to the right because it will increase productivity and output. As a result, businesses can produce more goods and services in the short run. However, it will also shift the long-run aggregate supply curve to the right because human capital is a factor that affects the economy's potential output in the long run. So, investments in human capital will increase the economy's capacity to produce goods and services over time.

An Increase in the Amount of Human Capital ___________The Short-Run