The line showing potential GDP is a vertical straight line because
A)there is only one level of full employment at any point in time.
B)economists are unsure about how to determine potential GDP.
C)it represents the minimum level of real GDP in a recession.
D)when nothing else changes,a higher price level has no effect on real GDP.
E)the aggregate supply curve is upward sloping.

Question

Quizplus · Accepted Answer

The line showing potential GDP is a vertical straight line because there is only one level of full employment at any point in time. This means that there is a specific level of output that can be produced when all resources are fully employed and utilized, and any increase in demand beyond this level will only lead to inflation, not an increase in real output.

The Line Showing Potential GDP Is a Vertical Straight Line