Which of the following is NOT a determinant of the long-run level of real GDP?

• A. The stock of physical capital
• B. The rate of inflation
• C. The level of technology
• D. The quantity of labor

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what determines the long-run level of real GDP. Real GDP in the long run depends on factors that affect an economy's productive capacity, such as inputs and technology.
2. Step 2: Identify the key determinants of long-run real GDP: the stock of physical capital (machines, buildings), the quantity of labor (workforce size and quality), and the level of technology (efficiency and innovation). These factors directly influence the economy's ability to produce goods and services.
3. Step 3: Recognize that the rate of inflation is a measure of the general price level increase over time and does not directly affect the economy's productive capacity or the long-run real GDP.
4. Step 4: Compare each option to the definition of determinants of long-run real GDP. The stock of physical capital, level of technology, and quantity of labor are all inputs to production, while the rate of inflation is a macroeconomic indicator unrelated to production capacity.
5. Step 5: Conclude that the rate of inflation is NOT a determinant of the long-run level of real GDP because it does not influence the economy's ability to produce goods and services in the long run.