ECONOMICS
AGGREGATE SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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AD increases
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Investment increases
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Corporation tax increases
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The pound increases in value
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Detailed explanation-1: -The text notes that rising investment shifts the aggregate demand curve to the right and at the same time shifts the long-run aggregate supply curve to the right by increasing the nation’s stock of physical and human capital.
Detailed explanation-2: -The primary production factors that cause the changes in the LRAS curve include labor productivity levels, workforce size, capital size, and education levels. When the economy experiences an increase in growth and investments, the long-run aggregate supply curve also shifts to the right, and vice versa.
Detailed explanation-3: -This increase in the capital stock leads to an increase in aggregate supply, both short run and long run, causing the SRAS and LRAS curves to shift rightward.
Detailed explanation-4: -Investment is a component of aggregate demand (AD). Therefore, if there is an increase in investment, it will help to boost AD and short-run economic growth. If there is spare capacity, then increased investment and a rise in AD will increase the rate of economic growth.