Potential output can be increased by ____ or by ______?
Correct answer: D. increasing the use of all inputs, technical advances
- A. increasing the use of labor increasing the use of land
- B. increasing the use of capital increasing the use of labour
- C. increasing the use of land increasing the use of capital
- D. increasing the use of all inputs, technical advances
Explanation
Production can rise through greater use of all factor inputs, such as labour, land and capital, or through technological progress that makes existing inputs more productive. Increasing only one input is not the complete general answer.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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