Question

What are typical GDP patterns for a high-income economy like the United States in the long run and the short run?

a) Stable in the long run, fluctuating in the short run.
b) Fluctuating in the long run, stable in the short run.
c) Increasing in both the long and short run.
d) Decreasing in both the long and short run.

Answer 1

The typical GDP patterns for a high-income economy like the United States exhibit long-term stability with an increase, while exhibiting fluctuations due to business cycles in the short run, evidenced by occasional recessions and depressions.

Step-by-step explanation:

Typical GDP patterns for a high-income economy like the United States can be characterized as stable in the long run but fluctuating in the short run. Over the long term, U.S. real GDP has increased dramatically, showing a general upward trend in economic growth. However, this growth is not uniform year to year; it speeds up and slows down, indicating business cycles. Short term declines in GDP, known as recessions, have regularly interrupted this general rise. A significant decline in GDP signals a recession and, if particularly lengthy and severe, may lead to a depression, such as the 1930s Great Depression and the 2008-2009 Great Recession.