Check back soon! D) raise future consumption. is long run growth that can continue in the face of the limited supply of natural resources and the impact of growth on the environment. Analysts watch economic growth to discover what stage of the business cycle the economy is in. 1:33. a higher saving rate. C) decreased current saving and increased current consumption. D 21) One of the benefits of long- run economic growth is A) growth in nominal GDP greater than real GDP. Gross Domestic Product: The change in GDP is used to determine economic growth within a country. Suppose there are two countries that are identical with the following exception. That creates an asset bubble. E) lower future living standards. The Phases of Economic Growth . Government Activity. The very long run is a situation where technology and factors beyond the control of a firm can change significantly, e.g. Aggregate Demand, Including Changes In Labour, Capital, And Technology. If growth is too far beyond a healthy growth rate, it overheats. D) increased future interest rates. Moreover, the effect on the long-run economic growth rate is only temporary. Macroeconomics. The long-run economic growth is determined by short-run economic decisions. Government activity and policies have a direct impact on long-run growth. It has been shown, both theoretically and empirically, that technological progress is the main driver of long-run growth. In economics, long-run models may shift away from short-run equilibrium, in which supply and demand react to price levels with more flexibility. Why might persistently large borrowing by the U.S. government ultimately limit long-run economic growth in the future? capital accumulation. in the very long run: New technology may make current working processes outdated, e.g. Malthus does not believe in any long run theory, he is concerned with the short period fluctuations of wealth. Thus, a country’s growth can be broken down by accounting for what percentage of economic growth comes from capital, labor and technology. C) decrease the long- run growth rate. Factors in Economic Development: He defines the problem of development as explaining the difference between potential gross national product and actual gross national product. technological progress. ; A better measure of productivity growth is total factor productivity which takes into account changes in the amount of capital to use and also changes in the size of the labour force. How a Long Run Works . all of the above. rise of the internet and digital downloads have changed the face of the music industry, making it hard to make a profit from selling singles. This is when the economy is growing in a sustainable fashion. Related Flashcards. In economics, it's extremely important to understand the distinction between the short run and the long run. Which of the following must occur to sustain economic growth in the long run? Long Run . Chapter 8: Economic Growth Rates, Real GDP; answer. The best phase is expansion. With a higher savings rate the economy moves to a new steady-state capital-labor ratio and the economy returns to its previous long-run growth rate, although at a higher standard of living. B) decreased productive capacity. If the savings or investment policy is not maintained then the opposite occurs. We commonly focus on labour productivity measured by output per person employed or output per person hour. Question: Long-run Economic Growth Is Generally Positive Rather Than Negative Because Long-run Changes In Output Are Driven By Changes In The: LRAS, Including Changes In Consumption, Investment And Net Exports. LRAS, Including Changes In Labour, Capital, And Technology. sustainable long-run economic growth. 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