Changes in factor supplies have little influence on short- run GDP growth but are important to long- run growth in output because
A)additions to the labour force and capital stock happen only gradually over time.
B)land cannot be changed in the short run.
C)it is almost impossible to change the capital stock in the short run.
D)wages increase rapidly in the short run, thus dampening the growth of employment.
E)only aggregate demand is observed in the short run.

Question

Quizplus · Accepted Answer

Supply factors such as additions to the labour force and capital stock take time to have an impact on output, thus they are more important for long-run growth than short-run GDP growth. Land is a fixed factor of production that cannot be changed in the short run, while changes in the capital stock may also take time to materialize. Wages may increase rapidly in the short run, but this does not necessarily dampen employment growth. Lastly, both aggregate demand and supply are observed in the short run.

Changes in Factor Supplies Have Little Influence on Short- Run