Which of the following about potential GDP is true?
A) During a recession, actual GDP will exceed potential GDP.
B) Actual GDP cannot exceed potential GDP, even for short periods.
C) Actual output may be either above or below potential output depending on how fully resources are utilized.
D) The economy's potential output is the maximum output that could be achieved temporarily during a time of economic boom.

Question

Quizplus · Accepted Answer

Potential GDP represents the maximum level of output an economy can produce with its existing resources and technology. Actual output may be either above or below potential output depending on how fully resources are utilized. A recession occurs when actual output falls below potential output, while an economic boom occurs when actual output temporarily exceeds potential output.

Which of the Following About Potential GDP Is True