Answer to Question #55042 in Macroeconomics for wayne
To achieve long run growth the economy must use more of its capital resources to produce capital rather than consumer goods. As a result, standards of living are reduced in the short run, as resources are diverted away from private consumption. However, the increased investment in capital goods enables more output of consumer goods to be produced in the long run. This means that standards of living can increase in the future by more than they would have if the economy had not made such as short-term sacrifice. Hence economies face a choice between high levels of consumption in the short run and the long run.
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