The growth rate of potential GDP depends on
A)the rate of technical progress.
B)the growth rate of the capital stock.
C)the growth rate of the labor force.
D)all of the above.

Question

Quizplus · Accepted Answer

Potential GDP is the maximum level of output that an economy can produce with its existing resources and technology. The growth rate of potential GDP depends on all of the above factors - the rate of technical progress, the growth rate of the capital stock, and the growth rate of the labor force. Technical progress, which refers to advances in technology that make production more efficient, can lead to an increase in potential GDP. The growth rate of the capital stock, which includes physical capital such as machinery and infrastructure, can also increase potential GDP. Finally, the growth rate of the labor force, which is determined by factors such as population growth and changes in labor force participation, can impact potential GDP. Therefore, all of the factors mentioned in the options are important determinants of the growth rate of potential GDP.

The Growth Rate of Potential GDP Depends on