I saw a question that asked something like " which of the following best creates long-term and sustainable growth of real GDP?"
I figured that anything related to technology (increase in efficiency) or discovery of new assets would qualify. I correctly chose “discovery of new oil fields”.
But I saw another answer: “an increase in the propensity to consume by households.”
Why wouldn’t that be an acceptable answer? If consumers spend more, that increases business profits and businesses can invest more capital into new jobs, new machines, and new innovations.
Increase in the propensity to consume -> less savings. Savings are necessary for investments, which fuels growth. Consumers cannot increase spending beyond their wealth (present and future), and eventually must cut back and save more in order to boost investments and long-term growth.
I suppose that it boils down to how long “long-term” is. If you discover a new oil field that gives you a 100-year supply of oil, that may be enough to qualify as long-term and sustainable.
Without well-defined terms, it’s at best an ambiguous question.
Do not confuse economic sustainability with environmental sustainability. With all this talk about (environental) “sustainablity” these days it is easy to conflate the two. This is a straightforward economics question, the environment is in no way involved. You were right to choose the first answer. The discovery of a new oil field will definitely be economically sustainlable for decades to come (long enough to qualify as long term).
However, the household propensity to consume is volatile and could easily change from year to year. The Marginal Propensity to Consume (MPC) is calcualted as: change in consumption / change in income. Income could easily change with inflation, tax increases or falling wage rates. Although, an increase in consumption could lead to an increase in GDP, it will most likely be short term and not defined as sustainable for the above reasons.