In order to estimate the level of full- employment output, economists typically:

Question

Quizplus · Accepted Answer

Economists estimate potential output when the unemployment rate is equal to the natural rate of unemployment, as this represents the level of unemployment that occurs even when the economy is operating at full capacity. This means that all resources are being used efficiently, and there is no cyclical unemployment. Therefore, potential output is the maximum amount that the economy can produce without causing inflationary pressures.

In Order to Estimate the Level of Full- Employment Output