If actual output equals and grows with potential output
A) Inflation will be stable
B) The unemployment rate will equal the NAIRU
C) Output will be growing at nearly a 2.5 percent rate
D) All of the above

Question

Quizplus · Accepted Answer

When actual output equals and grows with potential output, it indicates a balanced economy where inflation is stable because demand and supply are in equilibrium. The unemployment rate will be at the Non-Accelerating Inflation Rate of Unemployment (NAIRU), meaning it's at a level that doesn't put upward or downward pressure on inflation. The statement about output growing at nearly a 2.5 percent rate is more specific and might not always be true, but it's often used as a rough estimate for potential growth in many developed economies. Therefore, all of the statements can be considered correct in this context.

If Actual Output Equals and Grows with Potential Output