Potential GDP
A) is always less than actual GDP.
B) is identical to actual GDP.
C) measures inflation.
D) is the output an economy could produce at full employment.

Question

Quizplus · Accepted Answer

Potential GDP is the maximum output an economy can produce at full employment, meaning that all of its resources and labor are utilized efficiently. It is a hypothetical measure of what an economy could produce if all of its resources were used optimally. Therefore, potential GDP is always greater than or equal to actual GDP, but never less than actual GDP.