Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?
A) An unanticipated increase in aggregate demand.
B) An anticipated increase in aggregate demand.
C) An increase in long run aggregate supply (LRAS).
D) An increase in wage rates

Question

Quizplus · Accepted Answer

An unanticipated increase in aggregate demand is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run, because it may lead to inflationary pressures and eventually result in a decrease in purchasing power and a decrease in aggregate demand. In contrast, an anticipated increase in aggregate demand or an increase in long run aggregate supply (LRAS) may result in sustained economic growth in the long run. An increase in wage rates may also contribute to sustained economic growth by increasing consumer purchasing power and incentivizing firms to innovate and invest in productivity-enhancing technology.

Which Is Most Likely to Cause a Temporary Spurt in the Growth