2.5 The Economic Cycle

What is the definition of short-run economic growth?

• An increase in the potential productive capacity of the economy.

• The actual annual percentage change in real GDP

• A decrease in the potential productive capacity of the economy.

• The actual annual percentage change in nominal GDP

What is the definition of long-run economic growth?

• The actual annual percentage change in real GDP

• An increase in the potential productive capacity of the economy.

• A decrease in the potential productive capacity of the economy.

• The actual annual percentage change in nominal GDP

What is the primary cause of an increase in economic growth in the short run?

• Increase in aggregate demand

• Decrease in aggregate demand

• Increase in long-run aggregate supply

• Decrease in short-run aggregate supply

What does the equation C + I + G + (X-M) represent?

• Aggregate Supply

• Aggregate Demand

• Short-Run Aggregate Supply

• Long-Run Aggregate Supply

Economic growth can also occur if there is an increase in which of the following?

• Long-run aggregate supply

• Short-run aggregate supply

• Aggregate demand

• Aggregate supply

SRAS will increase if there is a change in which of the following?

• Consumer preferences

• Costs of production

• Government policies

• Technological advancements

What does an increase in AD to AD1 indicate in the short-run economic growth diagram?

• A decrease in economic growth

• An increase in economic growth

• No change in economic growth

• A decrease in the price level

What happens to the price level if economic growth is caused by an increases in AD?

• The price level decreases

• The price level remains the same

• The price level increases

• The price level decreases

What must occur for long-run economic growth to happen?

• Decrease in the productive capacity of the economy

• Increase in the productive capacity of the economy

• Decrease in long-run aggregate supply (LRAS)

• No change in the productive capacity of the economy

What does an increase in long-run aggregate supply (LRAS) indicate?

• Decrease in the quantity of factors of production

• Increase in the quantity or quality of factors of production

• No change in the factors of production

• Decrease in the quality of factors of production