Suppose there is a small change in the rate of productivity growth.What would be the effects on output in the short run and long run?
A) a small effect on output in the short run, and a small effect on output in the long run
B) a large effect on output in the short run, and a large effect on output in the long run
C) a small effect on output in the short run, but a large effect on output in the long run
D) a large effect on output in the short run, but a small effect on output in the long run

Question

Suppose there is a small change in the rate of productivity growth.What would be the effects on output in the short run and long run?  
A) a small effect on output in the short run, and a small effect on output in the long run 
B) a large effect on output in the short run, and a large effect on output in the long run 
C) a small effect on output in the short run, but a large effect on output in the long run 
D) a large effect on output in the short run, but a small effect on output in the long run

Quizplus · Accepted Answer

In the short run, a small change in productivity growth may not have a significant effect on output as firms may not be able to adjust their production levels immediately. However, in the long run, firms can adjust their capital and labor inputs to take advantage of the higher productivity growth, leading to a larger increase in output. Thus, the effect on output in the long run is likely to be larger than in the short run. Therefore, option C is the best choice.

Suppose There Is a Small Change in the Rate of Productivity