Chapter 7R, Problem 24MCQ

To determine

The correct option that determines the economic growth.

Answer to Problem 24MCQ

Option d is correct.

Explanation of Solution

Explanation for the correct option:

d.

During economic growth real GDP is increased and AD, SRAS, and LRAS will shift towards the right as shown in the graph below:

  

Therefore, option d is correct.

Explanation for incorrect options:

a.

AD, LRAS, and SRAS will shift towards the right which represents the increase in real GDP or economic growth. Therefore, option a is an incorrect answer.

b.

The leftward shift represents the decrease in real GDP. Therefore, option b is incorrect.

d.

In the short-run fluctuations can be above or below the potential output level. It means changes take place in the short run too. Therefore, option d is incorrect.

e.

Aggregate demand will also increase which represents economic growth. Therefore, option e is incorrect.

Economics Concept Introduction

Long-run aggregate supply curve: As per the long-run aggregate supply curve, the aggregate output supplied remains unchanged even if the aggregate price level is increased or decreased.