In macroeconomic analysis, the assumption that potential output (Y*)is changing is a characteristic of
A)the adjustment process.
B)the national accounts model.
C)the business cycle model.
D)the long run.
E)the short run.

Question

Quizplus · Accepted Answer

The assumption that potential output (Y*) is changing is a characteristic of the long run in macroeconomic analysis. This is because potential output refers to the maximum level of output that an economy can produce given its resources and technology. In the long run, these factors can change and thus affect potential output. In contrast, the short run is a period of time where potential output is assumed to be fixed and only aggregate demand can affect the economy's output.

In Macroeconomic Analysis, the Assumption That Potential Output (Y*)is Changing