Potential GDP would increase if
A)the rate of capital depreciation increased.
B)the labor force decreased.
C)the price level grew.
D)the rate of capital growth increased.

Question

Quizplus · Accepted Answer

Potential GDP would increase if the rate of capital growth increases, as more capital stock leads to higher productivity and therefore higher potential output. A) The rate of capital depreciation increasing would lead to a decrease in potential GDP. B) A decrease in the labor force would also lead to a decrease in potential GDP. C) The price level growing does not directly impact potential GDP, as it is a measure of the potential output of an economy assuming full utilization of its resources, regardless of the price level.

Potential GDP Would Increase If