Question

Which of the following factors would Not lead to an increases in potential output.

Select one:
a. an increase in human capital.
b. a decrease in the aggregate price level.
c. on increase in physical capital

Answer 1

A decrease in the aggregate price level is the factor that does not lead to an increase in potential output, unlike increases in human or physical capital which do contribute to economic growth.

Step-by-step explanation:

The factor that would Not lead to an increase in potential output is a decrease in the aggregate price level. Increases in human capital, such as raising education levels, and increases in physical capital, such as investing in new machinery, both contribute to higher potential output. However, a decrease in the aggregate price level does not directly increase an economy’s productive capacity; instead, it potentially impacts the overall demand within the economy.