The Paradox of Thrift Does Not Exist in the Long

question 107

Multiple Choice

The paradox of thrift does not exist in the long run because

• A)not everyone increases saving in the long run.
• B)aggregate supply has an impact on real GDP only in the short run.
• C)everyone increases consumption in the long run.
• D)changes in aggregate demand have no impact on real GDP in the long run.
• E)potential output is determined by changes in the price level.

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Definitions:

GDP

Gross Domestic Product; the total value of all goods and services produced over a specific time period within a country.

Per Capita GDP

The average economic output per person, calculated by dividing the Gross Domestic Product (GDP) of a country by its total population.

GPI

Genuine Progress Indicator, an alternative measure to GDP that takes into account the environmental and social costs of economic activity.

Per Capita Real GDP

A measure of a country's economic output that accounts for its number of people, adjusting for inflation to represent the value of goods and services produced per person.