In the short run, real GDP can increase beyond a level consistent with the long-run growth path if
A)existing capital and labor are used more intensely.
B)the price level decreases accordingly.
C)we measure in nominal terms instead of real terms.
D)there is an increase in marginal tax rates.

Question

Quizplus · Accepted Answer

When existing capital and labor are used more intensely, it can lead to an increase in production and output in the short run. However, this increase in output is not sustainable in the long run and may lead to diminishing returns to labor and capital.

In the Short Run, Real GDP Can Increase Beyond a Level