Potential real GDP is an estimate of the total output an economy can produce when it is operating at full capacity, meaning all resources are being used efficiently, including full employment. It does not refer to actual output in a given year, nor does it assume high unemployment or a downtrend over time.

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Potential Real GDP

Question 36

Multiple Choice

Potential real GDP:

A) is the amount of real output that has been produced in a given year
B) is the amount of real output that can be produced under the assumption of high unemployment
C) has exhibited a downtrend over the past three decades
D) is an estimate of the amount of real output the economy could produce assuming full employment

Correct Answer: