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:

Indifference Curve

A graph representing combinations of goods or services between which a consumer is indifferent, showing preference levels.

Marginal Utilities

The added enjoyment or usefulness a consumer gets upon consuming an extra unit of a good or service.

Marginal Utility

The additional gain in enjoyment or utility that an individual experiences from consuming one more unit of a good or service.

Indifference Curve

A graphical representation in economics of all combinations of goods that provide a consumer with the same level of satisfaction or utility.