Question

What is meant when economists say that the US economy has a higher safe speed limit than it had previously

Answer 1

The phrase 'higher safe speed limit' for the US economy suggests it can now sustain higher growth rates without negative effects due to improvements in education, technology, and physical capital.

Step-by-step explanation:

When economists say that the US economy has a higher safe speed limit than it had previously, they're referring to the capacity of the economy to grow without running into negative issues such as high inflation or an economic bubble. This 'safe speed limit' is influenced by various factors like the quality of the workforce, advancements in technology, and the overall productivity of the economy.

The US economy now benefits from a well-educated labor force, which has elevated the overall productivity. Moreover, technological growth, represented by the issuance of over 150,000 patents annually by the U.S. Patent and Trademark Office, has expanded the frontier of what's possible, allowing the economy to grow quicker without overheating. Improved physical capital, such as machinery and infrastructure, also plays a significant role in this increased capability.

Thus, this 'higher safe speed limit' suggests that the US economy can sustain higher growth rates today compared to previous decades, largely due to these improvements in human capital, technological innovation, and physical capital investments.

Answer 2

When economists say that the US economy has a higher safe speed limit than it had previously, it means that:

Overheating the US economy does not produce high inflation.

Step-by-step explanation:

The US economy is being overheated through rapid economic expansions. Some of these expansions are engendered by rapid technological changes. The US government also often indulge in aggressive economic expansions by ensuring maximum employment and capacity utilization. But these measures have been found to not distort the economy with high inflation rates. As a result, an economist can conclude that "the US economy has a higher safe speed limit than it had previously."