According to mainstream business cycle theory, _______ grows at a steady rate and _______ grows at a fluctuating rate.
A)aggregate demand; long- run aggregate supply
B)potential GDP; short- run aggregate supply
C)short- run aggregate supply; long- run aggregate supply
D)short- run aggregate supply; aggregate demand
E)potential GDP; aggregate demand

Question

Quizplus · Accepted Answer

Potential GDP grows at a steady rate, reflecting the economy's capacity to produce goods and services over the long term, while aggregate demand grows at a fluctuating rate, influenced by various factors such as consumer confidence, government spending, and monetary policy, leading to the cyclical nature of the economy.

According to Mainstream Business Cycle Theory, _______ Grows at a Steady