Changes in factor- utilization rates are considered important for explaining short- run changes in real GDP because
A)additions to the labour force occur more frequently than changes in the utilization rate .
B)changes to the capital stock are almost impossible to make in the short run.
C)the employment ratio of labour and the amount of excess capacity respond quickly to changes in aggregate demand or supply.
D)land and capital can change only in the short run.
E)wages increase and decrease rapidly in the short run, dampening the effect of factor utilization.

Question

Quizplus · Accepted Answer

The employment ratio of labour and the amount of excess capacity respond quickly to changes in aggregate demand or supply, making factor-utilization rates an important factor in explaining short-run changes in real GDP. Changes to the labour force and capital stock are relatively slow, while land and capital cannot change in the short run, and wage changes may dampen the effects of factor utilization.

Changes in Factor- Utilization Rates Are Considered Important for Explaining