Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Higher investment leads to an increase in long-run supply due to improved resource allocation.
B
Investment has no impact on long-run supply.
C
Long-run supply decreases with higher investment as resources are depleted.
D
Investment only affects short-run supply, not long-run supply.
Understanding the Answer
Let's break down why this is correct
Answer
Investment plays a crucial role in determining the long-run supply of an economy. When businesses invest in new equipment, technology, or facilities, they can produce more goods and services efficiently. This increase in production capacity means that the economy can supply more products over time, which is essential for growth. For example, if a car manufacturer invests in a new factory, it can produce more cars each year, leading to a higher long-run supply of vehicles in the market. Therefore, a higher level of investment generally leads to an increase in the long-run supply, supporting economic expansion.
Detailed Explanation
When businesses invest more, they can use their resources better. Other options are incorrect because Some might think that investment doesn't change supply at all; This option suggests that more investment uses up resources.
Key Concepts
resource allocation
Topic
Investment and Long-Run Supply
Difficulty
easy level question
Cognitive Level
understand
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