An increase in the quantity of capital increases ________ and increase in the full-employment quantity of labor increases ________.
A) the SAS and the LAS; only the SAS
B) the SAS and the LAS; only the LAS
C) the SAS and the LAS; the SAS and the LAS
D) only the LAS; the SAS and the LAS

Question

Quizplus · Accepted Answer

An increase in the quantity of capital increases both the short-run aggregate supply (SAS) and the long-run aggregate supply (LAS) because it enhances the economy's productive capacity. Similarly, an increase in the full-employment quantity of labor also increases both the SAS and the LAS for the same reason.

An Increase in the Quantity of Capital Increases ________ and Increase