Pre-IB Economics Practice Exam

Long-run growth comes from expanding the economy’s productive capacity. Increasing the capital stock—machinery, buildings, infrastructure—raises the amount of output the economy can produce in the future. Improvements in technology and policies that raise productivity make workers and capital more productive, effectively shifting the production potential outward. When these supply-side factors improve, the economy can sustain higher output over time. That combination—more capital and better technology or productivity-enhancing policies—best promotes long-run growth because it directly enlarges what the economy can produce in the long run. The other options either affect demand in the short term, can crowd out private investment or reduce efficiency, or do not inherently raise the economy’s capacity to produce over the long horizon.