In the United States, business cycles have occurred against a backdrop of a long-run trend of

Question

BlackTom AI · Accepted Answer

When considering what underlies the long-run trend in the United States, it helps to separate short-run fluctuations from the secular path of economic output.
Option 1: 'declining unemployment.' While unemployment can fall during expansions, this is a cyclical phenomenon tied to the business cycle rather than a statement about the long-run trend. Unemployment fluctuates with cycles and does not itself define the trend in output.
Option 2: 'rising inflation.' Inflation can vary over time due to monetary policy and supply shocks, but the long-run trend in the real economy is more properly described by real output growth rather than a persistent upward drift in the price level. This makes inflation an inappropriate descriptor of the long-run trend in GDP.
Option 3: 'stagnant productivity growth.' If productivity growth were stagnant, the long-run growth path of real GDP would be weak or flat. However, over the long run, productivity typically improves, enabling sustained increases in real GDP; thus this option conflicts with the prevailing view of a positive long-run trend in output.
Option 4: 'rising real GDP.' Over the long run, the United States has experienced positive growth in real GDP, reflecting increases in productivity, labor force, and capital accumulation that push the economy’s trend line upward. This captures the standard macroeconomic characterization of the long-run path.
In summary, while each of the other options highlights a dynamic aspect of the economy (unemployment, inflation, productivity), they do not describe the enduring upward trajectory of real GDP that defines the long-run trend. The long-run trend is most accurately described by rising real GDP.

In the United States, business cycles have occurred against a backdrop of a long-run trend of

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