There has been a decrease in investment.As a result, real GDP will ________ in the short run, and ________ in the long run.
A)increase; increase further
B)increase; decrease to its initial value
C)decrease; decrease further
D)decrease; increase to its initial level
E)increase; grow more quickly

Question

Quizplus · Accepted Answer

A decrease in investment leads to a decrease in real GDP in the short run due to reduced spending. In the long run, economies tend to adjust and return to their potential output, implying that real GDP will increase back to its initial level.

There Has Been a Decrease in Investment