In the basic AD/AS macro model,permanent increases in real GDP are possible only if
A)potential output is increasing.
B)the correct fiscal policy is implemented.
C)the economy's automatic stabilizers are allowed to operate.
D)the aggregate supply curve is vertical.
E)aggregate demand responds positively to demand shocks.

Question

Quizplus · Accepted Answer

Permanent increases in real GDP can only occur if the economy's potential output is increasing. This means that the economy's production capacity is increasing, allowing for sustained growth without causing inflationary pressures. This can occur due to factors such as technological advancements, improvements in infrastructure and education, or increases in the labor force. The other options do not necessarily lead to permanent increases in real GDP.

In the Basic AD/AS Macro Model,permanent Increases in Real GDP