Which one of the following statements is most accurate?
A) In the long run, foreign output depends only on the available domestic supplies of factors of production.
B) In the short run, domestic output depends only on the available domestic supplies of factors of production.
C) In the long run, domestic output depends only on the available domestic supplies of factors of production.
D) In the long run and in the short run, domestic output depends only on the available domestic supplies of factors of production.
E) In the long run, domestic output depends only on the real exchange rate.

Question

Quizplus · Accepted Answer

In the long run, domestic output depends only on the available domestic supplies of factors of production, such as labor, capital, and technology. This is because in the long run, factor prices, technology, and the level of capital stock can adjust to maximize output. However, in the short run, factors of production are fixed, and domestic output can be affected by fluctuations in demand or shocks to the economy. Choices A, B, D, and E are incorrect based on this reasoning.

Which One of the Following Statements Is Most Accurate