Potential output:
A) is the level of output that the economy would produce if all prices, including nominal wages, were fully flexible.
B) varies with the price level.
C) depends on the level of consumer confidence.
D) is greater in periods of expansion than in recessions.

Question

Quizplus · Accepted Answer

Potential output is the level of output that an economy would produce if all the resources were used at their normal rate, and all nominal wages, including other prices, could change easily to shifting market conditions.

Potential Output