Question

An expansion occurs when ________, when ________, or when both of these occur.

A. potential output grows slowly; actual output rises above potential output

B. potential output grows rapidly; actual output rises above potential output.

C. potential output grows rapidly; actual output equals potential output

D. potential output grows slowly; actual output equals potential output

Answer 1

An expansion occurs when potential output grows rapidly, when actual output rises above potential output, or when both of these occur.

Step-by-step explanation:

In economics, an expansion occurs when potential output grows rapidly, when actual output rises above potential output, or when both of these occur.

An expansion represents a period of economic growth, where potential output increases due to factors like investment in physical and human capital, technology advancements, and catch-up growth.

An increase in actual output above potential output indicates that the economy is performing better than its full employment level, which can be a result of increased demand or productivity.