In the absence of unexpected shocks, the economy will tend to experience
A) positive, noninﬂationary growth.
B) no changes in output or prices.
C) positive growth with mild amounts of deﬂation.
D) positive growth with mild amounts of inﬂation.

Question

Quizplus · Accepted Answer

In economics, the long-run trend growth rate of an economy is determined by factors such as improvements in technology, increases in capital and labor inputs, and improvements in productivity. In the absence of unexpected shocks, these factors will lead to positive economic growth. Mild amounts of inflation are generally considered beneficial for the economy because they encourage spending and investment, which contribute to growth. Therefore, the best answer is D: positive growth with mild amounts of inflation.

In the Absence of Unexpected Shocks, the Economy Will Tend