Suppose Real GDPs in Hauck and Meran Are Identical at $10

question 86

Multiple Choice

Suppose real GDPs in Hauck and Meran are identical at $10 trillion in 2010. Suppose Hauck's economic growth rate is 2% and Meran's is 4% and the rates remain constant over time. Calculate the percentage difference in their levels of potential output in 2046.

• A) There will be no difference in their levels of potential output.
• B) Meran's potential output will be 50% higher than that of Hauck's.
• C) Hauck's potential output will be 100% higher than that of Meran's.
• D) Meran's potential output will be 100% higher than that of Hauck's.

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Definitions:

Raises Prices

Refers to the action or factor that causes the price of goods or services to increase.

Profit-Maximizing

A strategy or objective of firms to adjust their production and pricing to achieve the highest possible profit.

Long-Run Demand Curve

Illustrates how the quantity of a good demanded changes over time as all economic factors, including production technologies and preferences, can adjust.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some differentiation and price control.