Which of the following shifts both short-run and long-run aggregate supply left?
A)a decrease in the actual price level
B)a decrease in the expected price level
C)a decrease in the capital stock
D)a decrease in the money supply

Question

Quizplus · Accepted Answer

A decrease in the capital stock will shift both short-run and long-run aggregate supply left. This is because the capital stock represents the economy's stock of physical capital (machinery, equipment, etc.), which is an important factor of production. If the capital stock decreases, the economy will produce less goods and services, leading to a decrease in both short-run and long-run aggregate supply.

A) A decrease in the actual price level would shift short-run aggregate supply right (as firms reduce output to respond to lower prices) but not necessarily impact long-run aggregate supply.
B) A decrease in the expected price level would shift short-run aggregate supply right (as firms reduce output to respond to lower expected demand) but not necessarily impact long-run aggregate supply.
D) A decrease in the money supply would shift short-run aggregate supply left (as higher interest rates reduce investment and output) but may not impact long-run aggregate supply if the adjustment to the lower money supply is expected and planned for.

Which of the Following Shifts Both Short-Run and Long-Run Aggregate