In the short run, real GDP can increase beyond a level consistent with the long-run growth path if
A) labor productivity improves.
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

An increase in labor productivity can lead to an increase in output in the short run, allowing real GDP to exceed the long-run growth path. However, sustained long-run growth requires other factors such as investment, technological advancement, and education. Choices B, C, and D are incorrect since a decrease in price level, measuring in nominal terms, and an increase in marginal tax rates do not directly impact the level of real GDP in the short run.

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