question 27

Outci tings being equal. d. All of the above are correct. 27. After the global financial crisis, there has been a heated debate about whether the sluggish recovery in advanced economies reflects the secular stagnation or a slowing trend under debt overhang. Advocates of secular stagnation argue that tepid investment spending along with subdued consumption by households would result in persistent output gap and slow growth for many years to come. Also, the resulting excess of global savings over global investment in turn would put the real interest rate on a downward path. There are several explanations for this secular stagnation hypothesis. Which of the following cannot be viewed as such explanation? a. Decline in investment rates due to a dearth of profitable investment opportunities b. Decline in the relative price of investment goods - hence the same investment projects can be pursued by committing a smaller share of GDP, which results in a lower amount of investment in total. c. Decline in population growth rate means capital has less additional labor to work with, resulting in a lower amount of investment in total. d. All of the above are potential explanations