Increase in Sustainable Level of Real Output: Factors and Implications

Factors for Increasing a Country's Sustainable Level of Real Output

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Question

Which one of the following will most likely cause a future increase in a country's sustainable level of real output?

Answers

A. an increase in income redistribution payments from high- to low-income recipients

B. a decline in the nation's oil reserves

C. higher marginal tax rates

D. an increase in the national debt

E. an increase in the economy's net investment rate

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Explanations

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A. B. C. D. E.

Net investment can increase the supply of physical capital which makes it feasible for the economy to produce a higher level of output permanently into the future.

Investment in physical capital can expand the supply of buildings, machines and other physical assets. This allows the economy to produce and sustain a large rate of output, shifting both LRAS and SRAS to the right.

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