An economy's potential GDP is deﬁned as the level of output:
A) that is produced when all factors of production that are willing to be employed are being used.
B) that is produced when the economy operates at a point under its production possibility
C) that can be produced when all factors of production are employed in equal proportions.
D) that is produced in the economy in the short run.

Question

Quizplus · Accepted Answer

Potential GDP is defined as the level of output that an economy can produce when all factors of production (such as labor and capital) that are willing to be employed are being used at their maximum sustainable capacity, without causing inflation to accelerate.

An Economy's Potential GDP Is Deﬁned as the Level of Output