Potential GDP is the maximum amount of output that an economy can produce when all resources are fully employed. It is the level of real GDP that the economy could produce if all of its resources were fully utilized, which means that there is no cyclical unemployment. Therefore, B is the correct answer.

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Potential GDP Is

Question 235

Multiple Choice

Potential GDP is

A) the value of the maximum amount of output that can be produced at any given time.
B) the amount of real GDP that the economy would produce if it were at full employment of all resources.
C) another name for real GDP.
D) the amount of real GDP that the economy would produce if the unemployment rate was zero.
E) the amount of real GDP that the economy would produce if all unemployment was cyclical unemployment.

Correct Answer: