In the short run, the level of real GDP changes with changes in the
A) amount of capital used because the labor force is fixed.
B) level of technology because the labor force and capital are fixed.
C) money wage rate because it is assumed to be fully flexible.
D) quantity of labor because capital and technology are fixed.
E) amount of employment and amount of capital because technology is fixed.

Question

Quizplus · Accepted Answer

In the short run, the level of real GDP changes with changes in the quantity of labor because capital and technology are assumed to be fixed. This is due to the fact that firms can adjust their level of employment to produce more or less output, but they cannot easily change the amount of capital or technology they have in the short run.

In the Short Run, the Level of Real GDP Changes