Question

An increase in the capital stock will cause the (A) aggregate demand curve to shift left. (B) aggregate demand to shift right. (C) production possibilities curve to shift in. (D) aggregate supply curve to shift left. (E) long-run aggregate supply curve to shift right.

Answer 1

E) long-run aggregate supply curve to shift right

An increase in capital stock will increase GDP, decrease price levels, and increase aggregate supply.  When an economy gains more in capital, the aggregate supply curve shifts to the right.