Which set of changes is definitely predicted to lower Real GDP in the short run?
A) The money supply rises and labor productivity rises.
B) The U.S.dollar depreciates and wage rates fall.
C) The U.S.dollar appreciates and labor productivity rises.
D) Foreign real national income falls and wage rates rise.
E) none of the above

Question

Quizplus · Accepted Answer

Foreign real national income falling would lead to a decrease in the demand for U.S. exports, which would lower U.S. GDP. This is a short-run effect. Additionally, if wage rates rise, it would lead to an increase in the cost of production, which could cause firms to produce less and lower GDP. The other options given would likely have a positive effect on Real GDP, at least in the short run.

Which Set of Changes Is Definitely Predicted to Lower Real