Will an increase in an economy’s potential output, caused by
supply-side policies, result in an increase in real output?
(multiple choice)
a) According to the monetarist/neo-classical school an increase
in potential output always results in an increase in real output,
but according to the Keynesian school an increase in potential
output only increases real output if the economy is already
producing close to full capacity.
b) Yes, an increase in potential output always results in an
increase in real output...