In the long-run, potential GNP is variable because. I technological change takes place II the quantity of labour and capital is not fixed III. unemployment ...

In the long-run, potential GNP is variable because. I technological change takes place II the quantity of labour and capital is not fixed III. unemployment is not constant

Answer Details

The correct answer is (C) I and II only. In the long run, potential Gross National Product (GNP) is variable because of technological change and the fact that the quantity of labor and capital is not fixed. Technological change leads to an increase in productivity, which in turn leads to an increase in output. Also, the quantity of labor and capital can be increased through investment and population growth, respectively. This means that the potential output of an economy can increase over time. On the other hand, unemployment is not directly related to potential GNP and can be affected by a variety of factors, such as changes in government policies or the business cycle. Therefore, option III is incorrect. In summary, the correct answer is (C) I and II only, because potential GNP can vary due to technological change and changes in the quantity of labor and capital.