When Economic Growth (A Gradual Shift of LRAS to the Right)

question 122

Multiple Choice

When economic growth (a gradual shift of LRAS to the right) expands the production possibilities of an economy,

• A) a higher rate of real output can be achieved in the short run, but it cannot be sustained in the long run.
• B) a larger output can be attained even if unemployment remains at its natural rate.
• C) the general level of prices will rise if the money supply is held constant.
• D) the equilibrium in the goods and services market will be disrupted.

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Definitions:

Minimum Efficient Scale

The smallest amount of production a company can achieve while still taking full advantage of economies of scale regarding costs per unit of output.

Diseconomies of Scale

The condition when a company grows so large that the costs per unit increase, causing a decrease in efficiency.

Coordinating

The organization and alignment of activities, processes, or efforts to ensure efficient and effective achievement of goals or outcomes.

Managing

The process of planning, organizing, leading, and controlling resources to achieve specific goals.