When the economy is at its potential output level,which of the following is true?
A)The price level is higher than that expected by workers.
B)The nominal wage is equal to the real wage.
C)The unemployment rate is about 14 percent.
D)The economy is producing its maximum sustainable output.
E)The actual price level is less than the expected price level.

Question

Quizplus · Accepted Answer

When the economy is at its potential output level, it is producing its maximum sustainable output without causing inflationary pressures. This means that the economy is operating at full employment and utilizing all available resources, including labor and capital, without causing an increase in the price level. Therefore, D is the correct choice. Options A, B, C, and E are incorrect because they do not represent the characteristics of an economy operating at its potential output level.

When the Economy Is at Its Potential Output Level,which of the Following