The economy's potential or "Solow" growth rate fluctuates over time because of:

Question

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The potential or "Solow" growth rate of an economy is affected by real shocks such as changes in technology, natural disasters, and changes in resources. These factors can impact the productivity and efficiency of the economy, leading to fluctuations in the potential growth rate over time. Changes in the rate of inflation, monetary shocks, and demand shocks may impact the actual growth rate of the economy, but they do not directly impact the potential growth rate.

The Economy's Potential or "Solow" Growth Rate Fluctuates Over Time