Multiple Choice
Which one of the following is NOT true when the economy is in macroeconomic equilibrium?
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1. Introduction to Macroeconomics
Introduction to Economics
Multiple Choice
Sometimes an economy cannot grow because of external factors, such as:
A
international trade restrictions
B
increased domestic consumer spending
C
higher levels of technological innovation
D
improved labor productivity
Verified step by step guidance1
Step 1: Understand the question is asking about external factors that can prevent economic growth. External factors are influences that come from outside the domestic economy.
Step 2: Review each option to identify which one is an external factor. 'International trade restrictions' are policies or barriers imposed by other countries or international bodies, which are external to the domestic economy.
Step 3: Recognize that 'increased domestic consumer spending,' 'higher levels of technological innovation,' and 'improved labor productivity' are internal factors because they originate within the economy itself.
Step 4: Conclude that among the options, 'international trade restrictions' is the external factor that can limit economic growth by restricting access to foreign markets, inputs, or technology.
Step 5: Summarize that external factors like trade restrictions can reduce economic growth by limiting opportunities for exports, imports, and investment, which are crucial for expanding an economy.
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