Which of the Following Could Explain Why There Is an Increase

question 226

Multiple Choice

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP does not rise?

• A)SRAS shifted to the right by more than LRAS.
• B)AD shifted to the right by more than SRAS.
• C)AD shifted to the right by less than SRAS.
• D)SRAS and AD do not shift.
• E)The shift in LRAS was caused by a rise in investment.

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Definitions:

Gross Saving Rate

The proportion of total national income that is not spent on consumption or taxes, indicating the amount saved.

Gross National Income

An economic metric that totals the domestic and foreign output of residents of a country, including product taxes and minus subsidies not included in the valuation of output.

APC

Average Propensity to Consume, which measures the fraction of income spent on consumption out of the total income.

Disposable Income

Financial endowment to households for the purpose of spending and saving after mandatory tax deductions.