An economy's potential level of output can be altered by changes in:
A)the actual price level.
B)the expected price level.
C)aggregate demand.
D)real GDP.
E)its stock of capital.

Question

Quizplus · Accepted Answer

An economy's potential level of output is determined by factors such as its stock of physical and human capital, technology, and natural resources. An increase in the stock of capital (such as machinery, equipment, and infrastructure) can increase an economy's potential output by increasing the productivity of its workforce and the efficiency of its production processes. Therefore, the best choice is E.

An Economy's Potential Level of Output Can Be Altered by Changes