Suppose the economy is at full employment and companies suddenly increase their level of investment. A short-run increase in output will be followed by a reduction in output, resulting in an overall decrease in output.

Question

Quizplus · Accepted Answer

An increase in investment will lead to an increase in output, with no reason for a subsequent reduction in output. Additionally, it is possible for full employment to be surpassed in the long run as a result of increased investment.

Suppose the Economy Is at Full Employment and Companies Suddenly