Economic activity that is above potential output ________.
A)signals that potential output is about to increase
B)is not possible
C)results from an economic shock to which the economy has yet to adjust fully
D)occurs near the trough,rather than the peak,of a business cycle
E)none of the above

Question

Quizplus · Accepted Answer

Economic activity above potential output suggests that the economy is producing more than its capacity, which may result from an unexpected economic shock for which the economy has yet to adjust fully. It does not necessarily signal a potential output increase or occur only near the trough or peak of the business cycle. It signifies that the economy is producing above its sustainable level, which is not possible in the long run.

Economic Activity That Is Above Potential Output ________