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AP® Macroeconomics

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Declining Capital Stock

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Country X has been experiencing a decline in captial stock as many factories, and the equipment they contain, become obsolete.

What effect would this have on the AD/AS model in the short run?

A

Aggregate demand would shift to the left.

B

Short-run aggregate supply would shift to the right.

C

Aggregate demand would shift to the right.

D

Short-run aggregate supply would shift to the left.

E

Long-run aggregate supply will shift to the left.