A politician makes the following comment: "The fundamentals of our economy are very strong. According to market economists, we are producing more than anyone expected and even beyond what they call our potential output. My goal is to guarantee that we continue to produce more than our potential output throughout the next few decades." In the long run, can the politician achieve this goal? If the government follows the right policies, an economy can produce beyond its potential output indefinitely. When the output gap is positive, people are happier, and this will encourage them to produce beyond the potential output. This can only continue for limited time because eventually factories will need to make repairs, and people will want to reduce their hours. People like to push themselves to increase their earnings, so it is possible to produce more than potential output continuously.
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A politician makes the following comment: "The fundamentals of our economy are very strong. Accordin...
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