In the long run, increases in potential GDP are possible only if there is
A)growth in the supply of available factors or growth in factor productivity.
B)continuous growth in the saving rate.
C)an increase in the unemployment rate.
D)an increase in the general price level.
E)no government interference with the market system.

Question

Quizplus · Accepted Answer

Increases in potential GDP can only occur if there is growth in the supply of available factors of production (such as labor, capital, and natural resources) or growth in factor productivity (the efficiency with which factors are used). The other options listed do not directly contribute to an increase in potential GDP.

In the Long Run, Increases in Potential GDP Are Possible