A decrease in short- run real GDP that leaves potential GDP unaffected would be most likely caused by a (an)
A)decrease in factor- utilization rates.
B)decrease in interest rates.
C)increase in factor productivity.
D)decrease in unemployment rates.
E)none of the above are likely to cause a reduction in real GDP.

Question

Quizplus · Accepted Answer

A decrease in factor-utilization rates (such as decreases in capital stock, labor, or other inputs) would result in decreased production and therefore a decrease in short-run real GDP, while potential GDP would remain unchanged. A decrease in interest rates or unemployment rates, or an increase in factor productivity, would all likely increase real GDP, rather than decrease it.

A Decrease in Short- Run Real GDP That Leaves Potential