Which statement best describes a major source of long-run economic growth?
Correct answer: B. A sustained increase in productive capacity
- A. A temporary rise in inventory spending
- B. A sustained increase in productive capacity
- C. A one-time increase in the price level
- D. A short-term fall in unemployment
Explanation
Long-run growth requires an expansion of productive capacity through factors such as capital formation, labour skills, technology, and productivity. Temporary demand changes can raise output briefly without increasing the economy's potential output.
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About Macroeconomics
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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