Which of the following statements about potential GDP is false?
A)The Fed's goal is to have equilibrium GDP close to potential GDP.
B)When GDP is at potential, cyclical unemployment is zero.
C)It occurs when firms are producing at their maximum level of output.
D)It occurs when firms are producing with a workforce of normal size working normal hours.

Question

Quizplus · Accepted Answer

Potential GDP does not mean firms are producing at their maximum level of output; it means they are producing at a sustainable level without causing inflation, using normal workforce size and hours.

Which of the Following Statements About Potential GDP Is False