What is the level of real GDP called in the long run?
A) Frictional GDP
B) Short-run GDP
C) Potential GDP
D) Low capacity GDP

Question

Quizplus · Accepted Answer

The level of real GDP in the long run is called potential GDP, which is the maximum level of output that an economy can sustainably produce using its existing resources and technology without generating inflationary pressures. This level of GDP is determined by the economy's supply side factors such as labor force participation, capital stock, natural resources, and productivity. It represents the economy's production capacity in the absence of short-run fluctuations and is also known as full-employment or trend GDP.

What Is the Level of Real GDP Called in the Long