Monetary and fiscal policies that encourage the long-run growth of net investment and increase labor productivity are designed to move the economy in Figure 17.1 from point

Question

Quizplus · Accepted Answer

Point D represents a situation where the economy is stagnant with low net investment and productivity. Point C represents a situation where the economy is operating at full potential with high net investment and productivity. Therefore, to move from point D to C, policies that encourage long-run growth in net investment and labor productivity are required. This would shift the economy to a higher potential output and help achieve full employment.

Monetary and Fiscal Policies That Encourage the Long-Run Growth of Net