Potential GDP is the level of real GDP at which
A)aggregate demand equals short-run aggregate supply.
B)there is full employment.
C)there is a recessionary gap.
D)there is over-full employment.
E)prices are sure to rise.

Question

Quizplus · Accepted Answer

Potential GDP is the level of real GDP at which full employment is achieved, meaning all available resources are being utilized efficiently without excessive inflationary pressures. It is estimated based on the long-term growth rate of labor force and productivity.

Potential GDP Is the Level of Real GDP at Which