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

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 is determined by long-term factors such as technology, capital stock, and labor force, which change slowly over time. In the short run, potential output is assumed to be fixed, while in the long run it is allowed to adjust. The adjustment process (B), national accounts model (C), and business cycle model (E) can all be relevant to macroeconomic analysis, but they do not necessarily involve a changing potential output assumption.

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