When an economy experiences long-run growth there will be:

Question

Quizplus · Accepted Answer

Long-run growth refers to a sustained increase in real GDP over time. This is typically achieved through increases in productivity and/or increases in the inputs of production (such as labor and capital). As output potential increases, potential GDP also increases. Therefore, choice A - an increase in potential GDP - is the best choice. Choice B may be true in the short run, but in the long run an increase in productive capacity is necessary to sustain growth. Choice C is incorrect as a shift in aggregate supply to the left would indicate a decrease in output potential, which is not consistent with long-run growth. Choice D may be pursued by policymakers to stimulate growth, but it is not a necessary condition for long-run growth.

When an Economy Experiences Long-Run Growth There Will Be