Asked by Chris Miller on Jun 21, 2024
Verified
An economy's potential level of output can be altered by changes in:
A) the actual price level.
B) the expected price level.
C) aggregate demand.
D) real GDP.
E) its stock of capital.
Stock of Capital
The total value of all durable goods and assets held by an individual, company, or economy that can be used in the production of goods and services.
Potential Level
An economic term referring to the highest level of output an economy can achieve when utilizing all its resources efficiently without triggering inflation.
Expected Price Level
The anticipated average level of prices in the economy, usually considered in terms of inflation or deflation expectations.
- Comprehend the notion of potential output and its susceptibility to economic influences.
- Investigate the repercussions of changes in capital stock on the economy's ability to produce.
Verified Answer
SG
Shaunee GonzalesJun 27, 2024
Final Answer :
E
Explanation :
An economy's potential level of output is determined by factors such as its stock of physical and human capital, technology, and natural resources. An increase in the stock of capital (such as machinery, equipment, and infrastructure) can increase an economy's potential output by increasing the productivity of its workforce and the efficiency of its production processes. Therefore, the best choice is E.
Learning Objectives
- Comprehend the notion of potential output and its susceptibility to economic influences.
- Investigate the repercussions of changes in capital stock on the economy's ability to produce.