According to the classical economic model, which of the following does not lead to an increase in the economy's potential output?

Multiple choice question for Aggregate Supply, Unemployment And Inflation. Select an option, then review the explanation below.

Explanation

In the classical framework, potential output is determined by real factors such as technology, capital, and labor. Increasing the money supply (monetary growth) does not affect the economy's productive capacity; it only influences nominal variables. Therefore, only options B, C, and D can raise potential output, while monetary expansion cannot.

Practice related questions from the same subject.

1.How would eliminating income tax likely affect the total employment and the natural rate of unemployment?
2.Which type of economic policies aim to decrease unemployment by weakening union influence, implementing tax reductions, lowering unemployment benefits, and providing investment incentives?
3.At any given real wage, the equilibrium unemployment rate is calculated as the difference between which two factors?
4.What type of unemployment affects an individual who loses their job due to a decline in an industry?
5.What factor can cause the short-run Phillips curve to shift position?

According to the classical economic model, which of the following does not lead to an increase in the economy's potential output?

Explanation

More Aggregate Supply, Unemployment And Inflation MCQs