Potential GDP refers to the maximum output an economy can produce without causing inflation to rise, due to the full employment of its resources, including labor and capital. It is not the same as real GDP, which is the actual output of an economy adjusted for price changes, nor is it unadjusted GDP or simply another name for real GDP.

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Potential GDP Is

Question 200

Multiple Choice

Potential GDP is

A) another name for real GDP.
B) always different from real GDP.
C) the level of GDP not adjusted for price changes.
D) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.

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