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 shaping the long-run supply of an economy. When businesses invest in new tools, technology, or facilities, they increase their ability to produce goods and services. This increase in production capacity means that the economy can supply more products over time, leading to a shift in the long-run supply curve to the right. For example, if a car manufacturer invests in a new factory, it can produce more cars, which helps meet consumer demand and boosts economic growth. Therefore, higher levels of investment generally lead to greater long-run supply potential in an economy.
Detailed Explanation
When businesses invest more, they can buy better tools and hire more workers. 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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