If an economy declined by 3 percent in one year, in order for the economy to return to trend growth within two years, it would have to increase at an annual rate that is
A)less than 3 percent.
B)equal to 3 percent.
C)greater than 3 percent.
D)unknown.

Question

Quizplus · Accepted Answer

To offset a 3 percent decline and return to trend growth within two years, the economy must grow at an annual rate greater than 3 percent. This is because it needs to recover the lost ground and then continue growing at its trend rate.

If an Economy Declined by 3 Percent in One Year