Vietnam’s Infrastructure Push to Drive Economic Growth

Answer the following questions to check your understanding of the story.

What are the short-run effects of government construction of infrastructure?

In the short run, government infrastructure construction _____________.

a) increases government expenditure, which increases aggregate demand and real GDP

b) increases business investment, which increases aggregate demand and real GDP

c) increases long-run aggregate supply, which increases potential GDP

d) increases short-run aggregate supply, which increases real GDP

What happens to the economy when roads and airports are built?

When infrastructure is built, _____________.

a) technology improves, and labor productivity increases

b) the capital stock increases, and labor productivity increases

c) the capital stock increases, and labor productivity decreases

d) the capital stock decreases, and labor productivity decreases

How does the aggregate production function change as roads and airports are built?

As infrastructure is built, the aggregate production function _____________.

a) does not shift, but the economy moves up along it, which decreases potential GDP

b) shifts upward, but the economy does not move along it, which decreases potential GDP

c) shifts downward and the economy moves down along it, which decreases potential GDP

d) shifts upward and the economy moves up along it, which increases potential GDP

How does infrastructure construction affect the economy in the long run?

In the long run, infrastructure construction _____________.

a) increases short-run aggregate supply while long-run aggregate supply does not change

b) increases long-run aggregate supply while short-run aggregate supply does not change

c) decreases both long-run aggregate supply and short-run aggregate supply

d) increases both long-run aggregate supply and short-run aggregate supply

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