Sia
Question
Statistics
Posted 4 months ago
Which of the following policies is most likely to increase potential output in the long run?
Choose 1 answer:
(A) Policies that encourage more household spending.
(B) Taxes on the gains from the sale of assets.
(C) Taxes on business investment.
D Weakening protections on intellectual property.
(E) Policies that encourage more saving for retirement
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Answer from Sia
Posted 4 months ago
Solution by Steps
step 1
Identify the policy that directly impacts long-term potential output: Policies that encourage saving for retirement can increase the capital stock over time, which is a determinant of potential output
step 2
Analyze the impact of other policies: Taxes on business investment and gains from asset sales are likely to reduce investment, while weakening intellectual property protections could discourage innovation. Increased household spending can boost short-term output but does not necessarily increase long-term potential output
step 3
Conclude with the policy that has the most positive impact on potential output: Encouraging saving for retirement increases the capital available for investment, which can enhance productivity and potential output in the long run
Answer
E
Key Concept
Capital accumulation
Explanation
Policies that encourage saving for retirement can lead to increased investment in capital goods, which enhances productivity and potential output in the long run.
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