Economic Growth Defined as Increased Productive Capacity

Steps:

• Recall the standard definition: economic growth measures the economy's ability to produce more goods and services over time.
• Evaluate options against this: identify which describes expansion in output potential.
• Eliminate choices indicating decline, stagnation, or unrelated price changes.
• Confirm the match with core economic principles like GDP potential.

Why B is correct:

• Economic growth is defined as an increase in the economy's productive capacity, often measured by rising real GDP, reflecting more efficient resource use and output potential.

Why the others are wrong:

• A: A fall in labor productivity signals inefficiency and reduced output per worker, opposing growth.
• C: An increase in CPI indicates inflation, a rise in price levels, not real output expansion.
• D: Entering a recession means declining economic activity and falling GDP, the opposite of growth.

Final answer: B