Which of the following is NOT a reason why real GDP can be expanded beyond a level consistent with its long-run growth path in modern Keynesian analysis?
A) In the short run, existing workers can work more hours.
B) Prices and wages are flexible, allowing for needed adjustments.
C) The existing capital stock can be used more intensively.
D) Higher prices induce firms to hire more workers.

Question

Quizplus · Accepted Answer

In modern Keynesian analysis, real GDP can be expanded beyond its long-run growth path due to a variety of factors including existing workers being able to work more hours in the short run (A), the existing capital stock being used more intensively (C), and higher prices inducing firms to hire more workers (D). However, prices and wages are not always fully flexible in the short run, which means that they may not be able to adjust quickly enough to maintain real GDP at its long-run growth path. Therefore, option B is not a reason why real GDP can be expanded beyond its long-run growth path.

Which of the Following Is NOT a Reason Why Real