Suppose there is a decline in the supply of capital (machinery and tools) in the factor market. What are the expected effects on the goods market?

Question

Accepted Answer

Firms will struggle to increase production, leading to higher prices in the goods market.

Answer

The goods market will increase production due to cheaper capital costs.

Answer

The goods market will see a decrease in consumer demand due to reduced product availability.

Answer

The goods market will be unaffected because capital does not impact production.

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