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Suppose a prolonged war in a country destroys 30% of the capital stock. In the long run, the price level will increase as oth long run and short run aggregate supply decrease.

What is capital stock?

  1. The number of common and preferred shares that a corporation is permitted to issue recorded on the balance sheet under shareholders' equity is known as "capital stock."
  2. The maximum number of shares that a corporation can ever have outstanding is equal to the quantity of capital stock.
  3. By issuing capital stock, a business can raise funds without taking on debt.
  4. The corporation loses more control, and the value of its outstanding shares is diluted when new capital stock is issued.

What effect does capital stock have on price level? 

The aggregate supply curve is directly influenced by capital stock, so as capital stock rises, so does the aggregate supply.The aggregate supply curve's rightward shift exemplifies this scenario.As a result, output rises and the price level decreases.

Suppose a prolonged war in a country destroys 30% of the capital stock. In the long run, the price level will increase as oth long run and short run aggregate supply decrease.

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