In the long run, what determines the level of total production of goods and services in an economy?
A)the interest rate and the amount of national saving
B)the quantity of capital and labor and production technology
C)consumption, investment, and government spending
D)the marginal products of capital and labor, constant returns to scale, and competition

Question

Quizplus · Accepted Answer

The level of total production of goods and services in an economy depends on the quantity of capital and labor as well as the production technology available. These factors directly impact an economy's productivity level. While consumption, investment, government spending, interest rates, and national saving may all influence an economy's production level in the short run, it is the quantity of productive inputs and production technology that have the most significant impact on an economy's long-term growth potential. Similarly, while the marginal products of capital and labor, constant returns to scale, and competition are all important economic concepts, they are secondary to the fundamental importance of the quantity of productive inputs and production technology available to an economy.

In the Long Run, What Determines the Level of Total