If the economy acquires a larger amount of capital goods in the current year, a larger outward shift in the production possibilities curve (PPC) will result. This is because capital goods are used to produce other goods and services, and an increase in capital goods means that the economy can produce more goods and services overall.
The long-run aggregate supply (LRAS) curve will also shift more to the right. This is because a larger capital stock means there is more potential for economic growth in the long run. This increased potential for growth will lead to a greater shift in the LRAS curve.
if the economy acquires a larger
amount of capital goods in the current year, does a larger or smaller outward shift in the production possibilities curve (PPC) result? Does the long-run aggregate supply (LRAS) curve shift more or less far to the right? Why?
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