Which of the following would most likely increase a country's potential GDP?

Advancements in technology are a key driver of increasing a country's potential GDP. When new technologies are developed and adopted, they can lead to greater efficiency in production processes, enabling the economy to produce more goods and services with the same amount of resources. This improvement in productivity often results in economic growth, as businesses can innovate and enhance their operations, ultimately leading to a higher output level of goods and services.

Technological advancements also stimulate investment, as firms may seek to upgrade their machinery or employ new methods that open up new markets or enhance existing products. Consequently, this growth in productivity and capacity means that the economy can achieve a higher level of potential GDP, reflecting the maximum output the economy can sustain without leading to inflation.

In contrast, increased military spending tends not to directly affect potential GDP in a productive capacity, while higher interest rates can discourage borrowing and investment, ultimately hindering economic growth. A decrease in the labor force would lead to a lower potential GDP, as a smaller workforce means fewer people available to contribute to the economy’s output. Thus, technological advancements stand out as the most effective means for enhancing a country’s potential GDP.