When an economy experiences sustained growth in real GDP,
A)potential GDP is likely to be increasing.
B)wage rates will decrease slowly as factor- utilization rates decrease.
C)factor prices are likely to be decreasing.
D)actual GDP is greater than potential GDP.
E)actual GDP is less than potential GDP.

Question

Quizplus · Accepted Answer

Sustained growth in real GDP indicates that the economy is producing more goods and services than before. This suggests an increase in potential GDP, which is the maximum amount of goods and services that an economy can produce over a sustained period of time. A sustained increase in real GDP implies that an economy is operating closer to its potential output, which indicates a trend towards full employment of its resources.

When an Economy Experiences Sustained Growth in Real GDP