Which of the following is false about potential output?
A) It is the level of output an economy can achieve when labor is employed at its natural level.
B) It is the long run output level that guarantees price stability.
C) It is also called the natural level of real GDP.
D) If a country is producing its potential output, then it is producing at a point on its production possibilities frontier.

Question

Quizplus · Accepted Answer

Potential output does not guarantee price stability; it represents the maximum sustainable output an economy can produce without causing inflation, but price stability depends on other factors as well.

Which of the Following Is False About Potential Output