Potential or full- employment output is
A)the maximum GDP that an economy actually achieves throughout its entire history.
B)achieved during periods when all of the labour force is employed.
C)the GDP that would be produced if the economy's resources were fully employed at a normal intensity of use.
D)the GDP that could be produced if the economy's resources were fully employed at their maximum intensity of use.
E)a goal that can never be achieved by the economy.

Question

Quizplus · Accepted Answer

Potential or full-employment output refers to the maximum level of output that an economy can produce when all of its resources are fully employed at their normal intensity of use. This level of GDP is achievable in the long run and represents the economy's productive capacity. It is not necessary for all members of the labor force to be employed to achieve potential output, as there may be some unemployment due to frictional or structural factors. Option A is incorrect because potential output is a measure of an economy's capacity, not its actual historical output. Option B is incorrect because full employment is not a necessary condition to achieve potential output. Option D is an incorrect statement as resources cannot be employed at their maximum intensity without causing inefficiencies and reduced productivity. Option E is incorrect because potential output is a goal that can be achieved.

Potential or Full- Employment Output Is