Over long periods of time, the growth rates of actual and potential GDP have been

Question

Quizplus · Accepted Answer

Over long periods of time, actual and potential GDP growth rates have been similar. This is because potential GDP represents the maximum level of output that an economy can produce with its existing resources and technology, whereas actual GDP reflects the realized output. As the economy grows and improves its technology and resources, potential GDP also increases, and actual GDP tends to move towards potential GDP in the long run. Therefore, both actual and potential GDP growth rates have a tendency to converge over time.

Over Long Periods of Time, the Growth Rates of Actual