If the Economy's Capital Stock Increases Over Time

question 111

Multiple Choice

If the economy's capital stock increases over time

• A) net investment is positive.
• B) depreciation is less than zero.
• C) depreciation exceeds gross investment.
• D) gross investment equals depreciation.

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Definitions:

MPC

Marginal Propensity to Consume, which indicates the fraction of additional income that a household is likely to spend on consumption.

Contractionary Fiscal Policy

Economic measures employed by a government to reduce its expenditures or increase taxes with the aim of slowing down an overheated economy.

Potential Output

The highest level of real gross domestic product (GDP) that can be sustained over the long term without increasing inflation, reflecting the maximum productive capacity of an economy.

Short-Run Aggregate Supply

The total production of goods and services in an economy at different price levels in the short-term, considering wages and resource prices as sticky.