Potential GDP refers to the maximum output an economy can produce without causing inflation to rise, due to shortages of labor, capital, land, and entrepreneurship. It is not directly related to the current state of the economy, whether in recession or at a peak, but rather to its capacity for production under ideal conditions.

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Potential GDP Is the

Question 185

Multiple Choice

Potential GDP is the

A) the maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.
B) current value of production in the economy.
C) value of production when the economy is in a recession.
D) value of production when the economy is at a peak.

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